- August 25, 2023
- Posted by: legaleseblogger
- Category: Related News
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Title: Seeking Financial Guidance for Managing an Inheritance and Planning for the Future
Introduction:
Hello everyone! I hope this post finds you all well. I find myself in an exciting but overwhelming situation and would greatly appreciate some advice. I apologize if this isn’t the appropriate place to ask, but I believe the community here can provide valuable insights.
Current Financial Situation:
At the age of 30, I am a female residing in Toronto, Canada, with an annual income of around $80,000 from my full-time job. However, my student debt of $55,000 has been a burden, and I have only managed to make minimal progress in paying it off. Until recently, I had approximately $10,000 in savings. However, a recent turn of events has led me to inherit an unexpected sum of approximately $500,000, which has left me unsure of how to effectively manage this significant windfall.
Financial Goals:
Given this newfound financial stability, I have several objectives that I would like to achieve with the inherited money:
1) Clearing all my existing debt, providing me with a clean financial slate.
2) Establishing a robust emergency fund that can cover six months to a year of expenses, ensuring I am financially secure during unforeseen circumstances.
3) Exploring investment opportunities – such as dividend-based investments – to generate additional income for discretionary spending, such as travel and other personal expenses.
4) Ensuring I save adequately for retirement, allowing me to enjoy financial security in my golden years.
5) Treating myself to a well-deserved trip as a way to honor the inheritance while creating cherished memories.
Dwelling Considerations:
Currently, I rent a rather expensive apartment that brings me happiness. However, the question lingers on whether I should take this chance to invest in a property now or delay until I find a partner to share the financial responsibility of homeownership. Given my long-standing student debt, the idea of taking on a mortgage makes me apprehensive.
How AI Legalese Decoder Can Help:
In such a complex and pivotal time, utilizing AI Legalese Decoder can prove immensely beneficial. This innovative tool harnesses the power of artificial intelligence to aid in comprehending legal documents, contracts, and financial jargon. With the guidance provided by AI Legalese Decoder, I would be able to navigate the intricate processes involved in managing my inheritance and making informed decisions regarding investing, debt management, and potential real estate ventures.
Seeking Advice for Long-Term Planning:
To ensure the best utilization of this unexpected inheritance and to secure a bright future for myself, I kindly request your advice on where to commence my financial journey and how to plan effectively for the long term. As an individual who may not possess the earning potential to accumulate such a substantial amount independently, I am eager to stretch these funds as far as possible, setting myself up for lasting financial prosperity.
Conclusion:
Thank you all for taking the time to read my post and for any guidance you can offer. Your thoughtful suggestions and insights regarding the management of this inheritance, investment strategies, real estate considerations, and long-term planning will be of tremendous help as I embark on this journey towards financial stability and prosperity. Your expertise will undoubtedly shape my path towards a bright future. Once again, thank you for your support!
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Introduction:
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AI Legalese Decoder:
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Conclusion:
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****** just grabbed a
See r/personalfinance/wiki/windfall
First off, don’t tell anyone. People may treat you different and try to take advantage of you when they think you have money.
See the prime directive on how to handle money at r/personalfinance/wiki/commontopics. It’s US-focused, but the same principals apply. I wouldn’t worry about investing this money for income today, I’d use it to secure my future. Fidelity’s rule of thumb recommends 1x salary saved for retirement by 30. I’m guessing you are behind on that right now, this is a great opportunity to catch up.
Buying a house could be worth it, but it usually takes a long time to pay off in expensive markets. US-focused, so it may be slightly different, but check out the NYT buy vs rent calculator https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html
If you plan on staying in one place for a long time buying often pays off, but keep in mind that buying come with a lot of maintenance and means a sizable emergency fund is important. What happens if you need to replace a roof?
[Windfall](https://www.bogleheads.org/wiki/Managing_a_windfall) is a good place to start.
1. Pay off all debt! Car, credit cards, and everything else. It’ll give you peace of mind.
2. Your emergency fund should cover 6 months of rent, but 1 isn’t a bad idea. In the event you don’t have a job, at least rent is covered. Assuming you can get unemployment, that’ll cover meal and utilities. I’m also assuming you paid off your car (if you have one) from #1.
3. Treat yourself but don’t go over board.
4. I wouldn’t buy a place this year. Interest rates are high. Just let the money sit in an investment fund and when you’re ready use that money to buy a place.
5. Season tickets to the Leafs! It’s an investment.
Draft a will as soon as you can if you don’t have one.
Try not to do too much retail [day] trading as there is far more bad information than good out there on what stocks to pick. Actual good investing is boring and quite time consuming. Dividends stocks are okay. But research shows that is not always the best way to invest.
If you think you’ll stay where you are for at least the next five years, buy a small place.
Like a one or two bed condo. 50% cash, a loan for the other half. Shouldn’t take more than 15 years to pay off, even in Toronto. You can always sell, when you want something bigger. Alone or with a partner.
The best and brightest thing you can do for your future is Before you spend your money. I would look at the group @boggleheads. Google boggleheads philosophy as well. It will tell you step by step what do to.
1. What are your interest rates with your school? Might be better to invest
2. Who do you bank with? open up a TD Direct Investment account and open a GIC. For emergency fund
3. No advised, you have no retirement.
4. Bogglehead philosophy and XEQT and or VGRO ETF FUND In TD direct investment account
5. I would not rush this, don’t blow the money. It’s not as much as you think it is. As you have no emergency fund, retirement, and have debt.
Cheers
I’m sorry for your loss. It is good to make a plan, but it’s important to take the time to grieve. Making decisions while grieving can mean making mistakes, or making decisions that you might regret later. Don’t be in any hurry, take your time and take advantage of the free education you can get on the personal finance wiki that was linked in another comment. It sounds like you have a good income and are already doing fine, so keep on keeping on until you are confident in your next steps.
An important step would be to talk to a tax advisor. There are tax implications to your inheritance depending on what kind of accounts you inherited. Talking to a financial advisor can be very helpful as well, but there are pitfalls to avoid. If you choose that, you will want to be sure they are a fiduciary, with a certificate that says so. Not one that says they’re basically a fiduciary, or like a fiduciary. An actual fiduciary. I have found it extremely helpful for us.
When I had to learn more about this subject, I stumbled across Suze Orman. She was doing a promo for her new at the time book “Women and Money”. She gave away digital copies to everyone that watched the Oprah show she was on, and I got it for free. She has free podcasts, and really gives back to her community. I like that. She stresses that it’s important to feel comfortable with the decisions that you’re making. And also to feel confident in your decisions. If you’re not comfortable with some thing, there’s a reason why and it’s important to ferret that out before you commit to something.
Best wishes!
Stick the money in a high interest savings account while you figure out what to do.
1. debt – depends on interest rate. If your student loan has a low interest rate then you are better off keeping it in the savings account.
2. emergency fund – keep a portion in that high interest savings account as emergency fund.
3. &4. Open a ROTH IRA, max it yearly. Learn to invest, while you are learning put most if not all of your Roth ira account into some broad ETF like VTI (or SPY or VOO) and SCHD. When you are more familiar with the market you can buy other stocks and ETF, but buying broad ETF is probably the safest set and forget. If you are brave enough, you can put a down payment on a house and rent out the extra rooms to help pay the mortgage.
4. Go and have fun, Budget wisely. Travel while you are still young and don’t have kids yet
Are you implying one needs to be an expert to handle 500k well?
You could get a financial advisor. It costs 1% a year and I find them helpful. Let them know your goals, pay off debt, travel a little, buy a house in 5 years, etc. Then they can set up the portfolio for your needs/wants. I’m sure many say do it yourself its a waste of money, but if you make a bad decision, or don’t factor in taxes, or any number of things it can cost way more than the 1% annual fee they charge. I also find it helps me save money because I have to email a different person to request funds to be transferred. Often times I’ll wait and save rather than transfer the money. You can also use one for a year or two while you sort it out and do more research. You don’t need one forever if you’d rather DIY.
Pay off your debts. Hire an accountant and have that person go over your financial profile. They will tell you how you are currently living. Buying real estate is an asset, and done properly should afford you cash flow yearly. You shouldn’t touch that extra income, it should be saved for rainy days but also paid to you as a manager to increase income to give you more buying power in the future.If your salary of $80k isn’t paying you to vacation then you can’t afford it. Don’t save for your future, invest in your future. Have a small savings that comes from your $80k salary, any extra funds should be investing into making you money and everywhere else live within your means. High interest savings Accounts will stay pay you less than the rate of inflation, your money is literally eroding if you’re not making above 9% returns. Dividend stocks don’t work if youre taking out the shares, but they are okay for long time saving. Investing on the market, not in it is not too bad as well.
Your plan is pretty solid.
Definitely pay off that debt. Rather just not have that tie you down your whole life.
When it comes to buying a property that’s up to you. Some will tell you not now, some will say it won’t matter, what matters is you buy when your ready.
Now if your looking at an investment property that is different. Buy a 2-2 or 3-2 place you can rent out isn’t bad and just refinance if lower interest rates occur.
Dividend are a good place to start. Check out
r/dividends. Could set your account to reinvest and have that money growing until you meet the lucky spouse to buy a place with!
You have a solid plan so far!
Consider hiring an accredited financial planner (not a % based advisor) who will work with you to develop a customized strategy.
Take that money and open a robo-managed brokerage account at Schwab or Fidelity. Easy, safe and the tax man is happy because all of that money is accounted for. From there, you can do whatever you want
Pay off all debt and put the rest into dividends. $300k in dividends and left alone to be automatically reinvested for 10 years, you’ll be able to replace your income with dividend income.
In the stock market the average double up on value happens every 7.2 years. Buy into VT, VGT, and VOO. Most money going into VT and VOO. Transfer funds every year to max out a Roth IRA. Retire early at 45 with enough funds to support what you make now into forever. Use your base pay to live off of and have fun. Retire early or in later years very wealthy and able to pass down the same gift to your family. Delayed gratitude in this case will turn 500k into a large fortune. Do not spend a penny until 15-25 years had elapsed.
Check your tax requirements.
1. Pay your debt off. )You can break it down to interst rates and compare them to intrest on savings, bit I’d pay it all off. The peace of mind is worth the few dollar difference for me.)
2. 6 months emergency fund in a hysa
3. $6500 in a Roth ira. Invest in index funds (vt, vti, vug)
4. Save for future expenses (car and house are going to big big ones)
5. Invest in appreciating assets that provide a distribution (Small business, real estate, training, stocks/funds)
6. Enjoy your vacation
talk to a fee only financial planner to figure out allocation, taxes, income, investments, etc.