Author Topic: I have a big chunk of money and am not sure how best to use it  (Read 1005 times)

Gil2211

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I have a big chunk of money and am not sure how best to use it
« on: February 02, 2020, 01:20:59 PM »
Been aware of MMM for quite a while, not the most frequent reader, though, and the sheer amount of information here is overwhelming.

I'm in my early 30s, no debt, I've been living a frugal/minimalistic lifestyle for the better part of 5 years. In that time I've managed to save around $100k, part of that's in an IRA, part in a high-interest savings account. Feel like I've got about half the equation right.

Considered investing it in graduate school at one point, in real estate at another, ultimately didn't pull the trigger on either. Feels overdue that I do something more productive with it.

What's considered "best" is obviously dependant on my goals. I'd like to either A) make some income off of it (could be very humble, I have super low overhead) or B) grow it more effectively than the little interest I'm currently getting. I suppose the default advice here is shovel as much as I can into an index fund(?).

Don't currently have a high salary where I could quickly bump the total up to more significant levels. Also, don't really want to lock all my money up.

Any advice would be appreciated even if it's just directing me to previous blogs. I did some searching but couldn't quite find what I was looking for. TIA.

Edit: I guess this could've been a case study. Just looking for some baseline advice or a helpful nudge or two though, not a full financial critique.
« Last Edit: February 02, 2020, 01:39:37 PM by Gil2211 »

Monerexia

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Re: I have a big chunk of money and am not sure how best to use it
« Reply #1 on: February 02, 2020, 01:39:19 PM »
Well, the standard advice is to put your capital to work balancing risk and return. You are right to be aware of the opportunity cost of leaving it in the savings acct. With 100K you can move tens of thousands of dollars around, so you can get creative and make a couple thousand churning bank accounts--$400 here, $500 here, $200 here and so forth. Also taxable index fund with some of it could be an option. Roth is another option for several thousand. You can withdraw any roth contributions so your money isn't locked up but you still get the benefit of the Roth. The benefit of the above is virtually no long-term risk--if you deploy the capital locally, or on your own business venture or some such you face several risks, e.g., lack of diversification, deficit of market knowledge, sector skills, liquidity issues and so forth which are largely gone when you invest in an index fund which is essentially saying you have trust in the best and brightest in the aggregate to adapt over time to any and all shocks. One cannot say that about any local venture or local group of managers, including oneself.

Lucky13

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Re: I have a big chunk of money and am not sure how best to use it
« Reply #2 on: February 02, 2020, 09:28:48 PM »
Re your option (a) do you have an idea for a business or a way to make some passive income? You mention real estate, which you seem to have considered and rejected, which is totally fine. If not then (b) seems like your only realistic choice. If you're hesitant to throw all that into an index fund, consider keeping a year or two of expenses in your high-interest savings account and invest the rest.

p.s. I don't really consider grad school an investment in the strict sense, unless maybe you're very sure your increased earnings over the course of your career would be high enough to make up for the expense (which often isn't true, depending on your field).

Saving in Austin

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Gil2211

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Re: I have a big chunk of money and am not sure how best to use it
« Reply #4 on: February 03, 2020, 04:58:23 AM »
Thanks for the tip about churning accts, not something I'd thought of before. This guy claims he's made $9k over four years - https://financialpanther.com/the-ultimate-guide-to-bank-account-bonuses/ - seems worth it if it isn't too much hassle.


Re: passive income - ideas I've been kicking around: affiliate marketing, peer-to-peer lending (especially curious about this one and if anyone here has had success with it), and my partner has a flat that's not too far from being paid off, I was considering to finish off the mortgage so then a portion of the rent would be semi-passive/shared income.

I need to check this link about stocks; hopefully, there's some beginner-level explanations and recommendations in there - thanks for that. Keeping a substantial rainy day fund and then investing the remainder in a Roth or something similar seems to be the thing to do.

grobinski

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Re: I have a big chunk of money and am not sure how best to use it
« Reply #5 on: February 03, 2020, 06:43:51 AM »
Following for cash reserve stache ideas.

Re: your p2p lending query - I asked about Worthy Bonds here a while back and @Xlar did some digging into the financials which did not instill much confidence.

https://forum.mrmoneymustache.com/investor-alley/worthy-bonds-5-fixed-rate/msg2356444/#msg2356444

I still have a small stache in Worthy and it has been growing at 5% as advertised. A recent look at Worthy shows them still at it and publicly confident in their solvency. However, I haven't made that stache bigger as it seems less risky to just leave the cash reserves in a brokerage index. Fwiw, I have grown the Worthy balance in $10 increments by sharing the referral code around which is easy free money.


If you have some cash to stash, use Worthy Bonds for 5% returns with no work by you! Easy to sign up and you can get the money out if you need it.

Use this code to get an additional $10 once you have $200 in for 6 months. (full disclosure, I also get $10 if you use the code). This is not a guaranteed investment. Do your research and be aware of the risk/reward equation.

https://worthybonds.com/?r=HABgN



Monerexia

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Re: I have a big chunk of money and am not sure how best to use it
« Reply #6 on: February 03, 2020, 02:28:15 PM »
Thanks for the tip about churning accts, not something I'd thought of before. This guy claims he's made $9k over four years - https://financialpanther.com/the-ultimate-guide-to-bank-account-bonuses/ - seems worth it if it isn't too much hassle.


Re: passive income - ideas I've been kicking around: affiliate marketing, peer-to-peer lending (especially curious about this one and if anyone here has had success with it), and my partner has a flat that's not too far from being paid off, I was considering to finish off the mortgage so then a portion of the rent would be semi-passive/shared income.

I need to check this link about stocks; hopefully, there's some beginner-level explanations and recommendations in there - thanks for that. Keeping a substantial rainy day fund and then investing the remainder in a Roth or something similar seems to be the thing to do.

Yep there's just a lot of loose change laying around if you keep an eye out for it. One of my banks offered a 3% no fee balance transfer offer up to 10K recently--I didn't have anything to transfer so I moved 10K from HELOC to checking, transferred that balance to the other bank, got $300, then paid the HELOC off. I hear my sister's voice "Oh Monerexia I can't believe you took advantage of those nice bankers" hahaha