Friday, July 25, 2008

A $10,000 Windfall: What to Do?

Last year my uncle, who I loved dearly, passed away from lung cancer - well, that's what you get when you are a surgeon who knows better but choose to smoke all your life. Anyway, in his will my uncle left me, my brother and my sister a sum of $10,000 each, and last week I received this amount by cashier's check.

The circumstances of getting the money suck, but now that I got it, what should I do with it? For now it's just sitting in my bank account earning interest at a rate of about 3 cents a decade. If we had any debt I would use the money to pay it down. But we have no debt. I am not a big believer in using windfall money to go on a shopping spree. I am not the shopping type, and we pretty much buy everything we need or want from our regular income. I suppose I could use the money to buy a new car - but my current vehicle still has 4 wheels and it moves forward when I press the gas pedal. I think the junk car stays.

I guess I could invest or save the money, that's my inclination anyway, but it seems like something is missing. There should be a bit more to this than sticking a $10K check into some index funds. I'm still trying to make up my mind. Any suggestions out there?


Dividend Growth Investor said...

First of all I am sorry for your loss.
If you are interested in investing that money you can simply buy a 10 year CD that yields 5% using $6139 and then invest the rest in dividend growth stocks. The worst thing that could happen is that you will have 10,000 by 2018 :-)

Alin said...

I would invest in an online business, find a good idea and make the programming work in Poland or Romania.

Or I would by cheap land in 3th world countries where the property right is respected. Like Albania, Irak (yes, Irak)Belarus, etc...The cheap land even with all kind of bubbles you will still have at least 20% growing each year. From 2002 to 2006 I had 12 times (yes, 1200%) profit from investing in land in Romania. Now this is gone because the prices are very high, but as I said still there are countries where you can invest. It's not food money, so you better invest in something a little bit more risky. What do you have to lose? you can lose a potential of $30,000 in 3-5 years if you don't invest, or you could have no profit, only $10,000. Or, if the country goes in some troubles, you lose everything (but will not be the case)

Traciatim said...

I kind of agree with Alin on the third world country thing. It would be interesting to set up a couple pieces of land in different countries in case you need them some day or just want to flip them.

If it were me though, I would buy some good dividend producers since stocks are pretty battered right now and just use the dividend payments each month as fun money.

Either that or stick in in a high yield savings account for when your car dies so that it can be replaced quickly with something that will run for a long long time.

Shadox said...

Thanks for the advice guys. Investing the money is no problem - if that was what I had in mind. I am firmly in the camp of index investing.

Although I think dividend paying stocks have a place in every portfolio, I don't think that as an asset class they have any unique benefits.

Investing in international real estate is not something that I feel myself qualified to do, except through my normal allocation to REIT index funds.

About saving the money for a rainy day: we're already well equipped to handle a financial emergency. Our emergency fund is fully funded. And when the time comes to buy a new car, you can rest assured that we will buy a USED car and pay for it in cash. No loans for us.

I guess what I am missing is something else that would help me differentiate my uncles gift from "ordinary" money.

Traciatim said...

So then are you talking something like find yourself a piece of cheap land in the middle of nowhere and plant 1000 trees on it, or try out a donation to style of stuff?
. . .
or do you mean something like buy a junker car and enter in a demolition derby style of stuff?

frugal zeitgeist said...

I'm sorry for your loss.

I have a suggestion for at least part of the money: Donate it to something that will help your uncle's memory live on. In New York, it's pretty common to endow park benches for people who loved Central Park. For my dad, we're buying a plaque on the memorial wall at my parents' retirement community. Maybe there's a similar way to honor your uncle.

You could also donate to a charity to fight lung cancer.

Joel Rotem said...

I would say your uncle gave you the money for one of two reasons:
A. To help you out (help which thankfully you don't need right now)
B. To enjoy

Using it to increase your net worth by 1-3% is most likely not what he had in mind...

That being said and remembering you can't take it with you, I would use it for something you really want that you would never spend your savings on. Since you are working your ass off, how about an unplanned family trip to somewhere like Hawaii? Australia? Seychelles?

Looking back, money I send on great experiences is always a good investment.