Financial Advice

December 8, 2002

Hey Guys,hope everyone had a good Thanksgiving,it been a hell of a time recently anyway i need some advice.Recently and to my huge shocki was the beneficiary of some money- a large amount in fact we're talking chin-on-the-floor-surprised when i found out ,it was an aunt of mine from my moms side of the family back in Ireland but anyway its taken a while to get over the shockof having a six figure bank account for the 1st time in my life and also with everything else i've had going on with my job promotion and change of job etc but i'm rambling .....

What i wanna know is what should i do with the cash ??? my instinct is to keep in the bank and do nothing my BF however is amazed i didnt quit my job the minute the cheque cleared by anyhoo should i be safe considering what is happening with the economy and all that or should i take advantage of the stock market and invest some in stocks and stuff .

I was also thinking about property i dont have a mortgage or anything to pay off but i was thinking of buying a couple of properties to rent out to give me an additional income or even buying and developing property to sell on for a profit ,I'm pretty good with building and decorating and stuff but i'm in a quandry.What would you do in my shoes ???????????

+ *glutes* · December 8, 2002

Rush, go slowly on any expenditure / investment!!!

After I had a 'moderate' inheritance, the best advice I received was 'wait a year', and it is a good thing I did. The reason being is your perspective changes on all your finances, and potential investments. I waited two years and wound up buying a foreign property and have made 25% on my money in less than a year.

Also be aware that 'vultures' and hangers-on will be after you once word leaks out that you have some new money. The most active one with me was my sister, with realestate deals, will changes , and of course the dreaded request for a major loan. (Anyone who asks for a loan now I ask them to put it in writting, including terms. This generally stops the process...)

bluenix · December 8, 2002

>What would you do in my shoes ???????????

I'd spend a small percentage on fun stuff, to help make it "real." Meanwhile, I'd be thinking about my financial goals (early retirement, where to live and in what style, travel, etc.). Then I would find a financial consultant who would help me develop an investment strategy to meet those goals. (Not your typical, garden variety, commission scrounging F.C. at XYZ Brokerage but someone who comes well recommended; perhaps specializes in high net worth clients.)

Congrats and good luck.

December 8, 2002

First, U need to spoil an escort whose good looking, sexy and smart. I'll be in NYC this week!!!! :+

Dan Dare

http://gaydar.co.uk/dandarela

+ *deej* · December 8, 2002

I agree with glutes. Wait a year.

There's a different mind-set surrounding having money vs. not having money. It takes time to settle into that mind-set.

You'll be tempted to buy a lot of stuff right away, but all you end up with is stuff. :9 If you wait a year, the list of stuff you might want to consider buying will be different as you mentally work your way through all the possibilities and come to grips with reality. Likewise, investments will look different to you a year from now once you've got used to the idea of having money.

Go ahead and treat yourself nice, but you won't really be out much if you leave that money in the bank for a year while you come to grips with the mind-set it enables.

And do go for the financial advisor. You've got the luxury of time to "shop" for the right advisor.

Oh, and do make sure that for the interim the money is at least in an interest-bearing account.

Justice · December 8, 2002

Good for you! Congrats! :7

First, put some of the money into an IRA. (The maximum IRA contribution is $3,000 for someone under 50 for the 2002 tax year.) Stick with something safe, like a certificate of deposit. They're not yeilding very these days, but at least you won't be risking any principle. Even if it is found money! You have until April 15th to do your research and make your decision.

Second, I agree with those who said wait at least a year. Read the financial pages, the Wall St. Journal, and as many other financial publications as you can. But don't do it all at once. The last thing that you want in information overload! Look for a financial advisor. You're going to get a lot of conflicting opinions so you're going to have to trust your gut. If someone is trying to sell you something that sounds to good to be true, then it probably is! It's better to keep the money in the bank then to risk losing a single penny of it, IMHO.

Third, make sure its in an interest bearing account. Most banks aren't paying very much interest these days, so you're going to have to shop around to get the highest possible rate. Some banks pay higher rates for higher balances. (I.E., There's at least one New York area bank that's advertising a 2.8% yield for balances over $25,000. That's not a very high yield, but it's better than the 0.6% yield that one of my banks is currently paying.

Good luck and enjoy! This is one problem that everyone should have!

:7

Cooper · December 8, 2002

Rush, We should all be so blessed to have the luck of an Irish aunt. Sorry about her loss, but her loss was your gain...When I came into a substancial sum of money a few years back, my idea was to make that money work for me. Let it provide a monthly income so I no longer had to work... Back in the mid 90's real estate was a more attractive/affordable investment than it is today. I had purchased some property and a few townhouses in NY. Recently, I sold most of my real estate holdings with a substancial return on my investment. If you are looking for safe investments, look into insured securities such as treasury bonds/notes and CD's, (also see if tax free investments are suitable for your tax bracket,) but as others have said, they are currently yielding a low return. If you have a stock broker, ask about high yield securities (stocks). This is the dividend the stock pays (usually quarterly), depending on your risk level, you can get from 7% return and up, also provides a nice monthly income...Another idea is collectables. They can make a fine investment. Example, if you know about art, or have a friend who does, try this as an avenue for some of your money . But be careful there are a lot of crooks in this area. Make certain to get everything appraised. There are many more wise ways to invest your money but I hope these few help. Again, depending on your age, ask a money manager to fill you in on a CRT (Charitalbe Remainder Trust) it helps me out with taxes and provides a steady income while alive... Finally, don't forget to have some fun with your money. Buy that sports car and take an "erotic" cruise...Now go out and enjoy the good life! Coop

trilingual · December 8, 2002

I agree with those who say use a little to treat yourself to a couple of fun things, and then park the rest for a year or so. (Like in a CD or a money-market account.) You didn't say what kind of six figures you're talking about (and I won't ask) but if you're talking about HIGH six figures you should be able to invest the money in a relatively conservative way that will provide you enough income to live on comfortably.

Don't do anything immediately, though, because you'll need time to sort out your future plans. For example, what are the chances of being able to retire this coming year? If you can, you might want to consider it. With your retirement income plus the income from your inheritance, you should be able to live very comfortably wherever you'd like. That also raises the question of deciding where do you want to live? Do you want to stay in NY? Move somewhere else? Or buy a second home where you can avoid the cold and snow? (And where there are lots of hot skimpily-clad men?)

One wise piece of advice given by financial advisors (not that I've ever taken it, but then I haven't got any kind of serious money to worry about) is not to put all of your assets in one basket. In other words, your aim should be to diversify, so if one thing isn't doing well, another part of your portfolio may compensate for it. Some rental real estate, or houses you buy/fix up/sell for a profit could be a part of your plan. (If you're going to do rental, you probably should think about property outside of NYC where you wouldn't have the constraints of rent controls.) Some careful purchases of stock are probably not a bad idea. The market is very low right now, overall, and you don't need a high-priced financial adviser to understand "buy low, sell high." If you can afford to put some of your inheritance into stocks and leave it in the market for 5 - 10 years, it's very likely you'll make money, because the economy and the market are bound to recover in that period of time. Just don't invest in any get-rich-quick things (like commodities, or anything someone peddles to you over the phone). The only people who get rich quick from those things, 99% of the time, are the people peddling them! Oh, and DON'T send any money to people who send you messages saying they need your help getting their multi-millions out of some African country and will cut you in on the deal! ;-) Also, it's not a good idea to lend money to relatives, unless you're very confident about them and you have a written deal. And even then it's not advisable. Instead, if you have relatives you want to help, just make reasonable, outright gifts. Talk to a tax adviser on how to do that to minimize taxes.

And that's my advice. I'm sure you'll get lots more! It's a sad way to come into money, but I'm certainly glad you now have the opportunity to do some different things with your life (if that's what you want to do) knowing that your financial future is secure. Lots of luck, always!

December 8, 2002

I think you should put it in the bank for now and decide what you wanna do with it whether using it for fun or investments. It never hurts to think about how you wanna best use it.

December 8, 2002

I was in the financial business before I retired.

I agree about getting a few luxuries and then waiting a year for anything serious. A suggestion: Ask yourself what three things you really want to do with your life. I did this many years ago, and then planned my career around it. Was the best thing I ever did.

In the meantime, start interviewing financial advisors. Some tips:

1. Make sure your advisor is an independent advisor as opposed to being a stock broker.

2. Make sure your advisor is a registered Certified Financial Planner. The CFP exam is comprehensive and rigorous and really means something. Go to http://www.cfp-board.org for more information about this. I went to business school with people who later became CFPs and have a great deal of respect for the rigor of that training.

3. Have an honest discussion about fees. Many people get squeamish, and as a result there is way too much tiptoeing around the subject. No one works for free. Expect fees to run in the 1%-1.5% of assets range. Also discuss ALL of the ways your advisor is compensated, i.e., find out whether they get commissions from the mutual fund company that they recommend.

All fees should be disclosed up front, and in writing. Similiarly, get in writing the planner's policies with respect to privacy.

4. Interview three planners. Pick one, with another as a potential backup. One criterion should be experience, not just in general but also with clients of your profile (see #5 below). Another is personal chemistry. Another is investment performance over the long term. If your first meeting goes well, on the second meeting get references and ask if you can be put in touch with some of them. And then call them. The biggest mistake people make is not checking references.

5. Be prepared to discuss your total financial picture. A good planner will ask about your tolerance for risk, your goals for financial returns, your time horizons, your tax situation, any legal issues and need for liquidity and any other specific issues that come up.

Good luck!

December 8, 2002

>Good for you! Congrats! :7

>

>First, put some of the money into an IRA. (The maximum IRA

>contribution is $3,000 for someone under 50 for the 2002 tax

>year.) Stick with something safe, like a certificate of

>deposit. They're not yeilding very these days, but at least

>you won't be risking any principle. Even if it is found money!

>You have until April 15th to do your research and make your

>decision.

>

Rather than CD's, what about savings bonds? They currnetly have better yields than CD's. Also, if you purchase them with an American Express rebate card, you get a 1% rebate which is in effect, a bonus for your first year.

Dan Dare

http://gaydar.co.uk/dandarela

OneFinger · December 8, 2002

I'm sorry for your loss because it always hurts when someone passes on. But what a blessing to have such a windfall.

I totally agree with the other comments that you should wait at least a year before making any major decisions. CD's or interest bearing bonds are a good place to park the money for a year. Shop around on interest rates because I've found that credit unions usually pay more interest than banks. In addition, you may want to consider multiple financial institutions. I believe your accounts are usually only insured for $100,000 per institution so you may want to use a couple of banks or credit unions.

The one "instant" investment I'd make is in an IRA. But, I would make sure it is a ROTH IRA. While you can have both a Roth IRA and a regular IRA, you can only constribute a total of $3,000 per year for 2002. The interest paid to a Roth IRA is non-taxable and is the best tax break the government ever gave us. (I'm sure it was an accident on their part.)

I'd also encourage you to listen to a radio call-in program hosted by Dave Ramsey. You can hear his program on-line at http://www.daveramsey.com/. Although he is a conservative and often quotes scripture, he has a very practical approach to handling your finances. I've followed his advice since 1994 and I'm now debt-free with a good nest egg toward my retirement. He likes to say that he gives you the kind of financial advice your Grandma used. My grandparents survived the Depression and they did have a sound approach to money matters.

Good luck with this new adventure.

December 9, 2002

Rush, first ... I'm sorry about your loss. Your Aunt must have thought very highly of you to leave you this money.

I think the best advice you have been given so far is to wait a year. I could not agree more!! Actually, wait at least a year.

I also agree with another poster who said that you need to sit down and decide what you want to do with your life. Is working only a means to pay your bills, or is it part of your life that you would not give up for any amount of money? I, for one, could never stop working. Also, it does make a difference in whether we're talking low or high six figures. What are your current plans for retirement? Are you planning on just living on a pension from the force? If you want to continue working until retirement, I suggest you invest long term with an eye on retirement benefits. Committing your money for the long term usually leads to higher returns.

I also cannot caution you enough about pursuing areas of investments that you know absolutely nothing about. You will find an endless line of people who will want to help you invest your money. And so many are just out for themselves. It is so very easy to spend or risk someone else's money (and that someone else is you!). So be very, very careful. If you fuckup, you've lost it!

But only you can decide what is best. Go with your gut. If you feel uneasy about an investment, there's probably a good reason. There are so many pros and cons to all investments. Talk to as many people as you can and just listen and absorb it. Over time, you should see patterns (good and bad) and get an idea as to what type of investment is best suited for you, your personality, and your goals in life.

Good luck to you!

December 9, 2002

Rush, no need to wait a year. You will be chomping on the bit and will end up doing something with that cash.

The best advice I can give you is to assess your goals. Since the inheritance is abrubt, revise your goals.

Make a one year, 3 year, 5 year and 10 year goals. These can include retirement, a home, travel, business property etc. Since I dont know YOU, your age, your spending habits, debts, dreams or the amount of cash you have in total, you have to be in control and depending upon YOUR goals, ONLY you can determine what to do with the money.

Personally, I dont like to hear of anyone plowing all their money into one financial vehicle, thus I do hope you take advantage of the stock market for at least 25% of your funds IF you have at least a 5 year time horizon. Invest wisely and consult a finacial professional if you have limited knowledge of the markets.

Good Luck and Enjoy.

Justice · December 11, 2002

I heard about this while getting dressed this morning and immediately thought about this thread. Rush, here's what NOT to do with your money.

http://www.nydailynews.com/12-10-2002/news/story/42215p-39831c.html

Sorry, I couldn't resist.

Justice · December 11, 2002

I heard about this while getting dressed this morning and immediately thought about this thread. Rush, here's what NOT to do with your money.

http://www.nydailynews.com/12-10-2002/news/story/42215p-39831c.html

Sorry, I couldn't resist.

December 11, 2002

Here's some of my advice:

(1) Diversify, diversify, diversify! Put your money into various types of investments, in many different types of industries, and many, many different companies. Do not put any significant amount of money in any one place.

(2) I disagree with those who advise to park your money for a year and do nothing. Especially if one assumes that we're talking over $250,000, a year of doing nothing can mean a substantial amount of money lost.

(3) Now is a great time to put money into the stock market. Prices are good. Bear in mind that in a five-year window, you cannot predict where the stock market will be. However, if you have money that you can leave alone for at least ten years, stocks have historically always done better than most other investments. This doesn't mean you should put all of your money in the stock market. However, I would put a good deal of it in if you don't need to touch the money in the next several years.

(4) A good safe place to put money is municipal bonds. Their interest is free of state and federal income taxes. You won't make a lot of money, but you'll usually stay ahead of inflation.

(5) I would avoid CD's. Not only do they earn very little interest, but the interest you do earn is taxable. CD's almost never let you keep up with inflation, let alone stay ahead. This means you will almost always lose real money when you leave it in CD's. The main utility for CD's is if you know you will need X amount of money in Y number of months. You can then invest X in a CD maturing in Y months and know you won't lose principal. But it's not a general investment tool.

(6) This is probably a good time to invest in real estate income property, if you're interested in that. Interest rates are so low that you can probably earn more in interest than the fixed mortgage rate minus you tax-deductable portion. But be aware of real estate values in you particular community.

(7) As someone else pointed out, be aware of the maximum FDIC insurance for any individual account.

(8) I personally like broadly-diversified mutual funds. Be aware of any "load" and maintenance costs. A general fund such as an unmanaged fund based on the S&P 500 does as well most managed funds at lower costs. If you have someone else suggest investments for you, be sure to ask about "loads" and "maintenance fees." I have plenty of good mutual funds with no loads and annual costs of less than 2%.

(9) Don't forget to diversify internationally as well. Put some of your money in foreign investments.

December 11, 2002