Financial planning after divorce

[Sweetpotatofries]

I'm just coming out of a contentious divorce in which over $140k was collectively spent on lawyer's fees (we are in New York, and it's nuts, and we had a custody evaluation). In any event, most of my personal resources were decimated by the fees. I didn't go into debt but I did spend the majority of my premarital savings.

Now, I'm looking at the big picture and want some good Mustachian advice on what to do with the following: I will receive $120k in three chunks ($40k each in September 2019, December 2019, and March 2020). Ex-husband is buying me out of our house ($90k which is my half of the equity) and paying one year of alimony upfront ($30k) instead of two years on a monthly basis - bird in the hand and all that.

Right now I'm essentially at $5,000 to my name and my income otherwise barely covers my expenses. Do I invest all of it in VTSMX at once? Do I invest $10k each month, or is that playing at market timing? After June 2020 when I move out of the marital residence, I will need to draw on the principal for income because my rent will cost more than current housing expenses but I'm not sure how much of it I'll have to withdraw. I don't know if that changes the equation.

[tawyer]

Sorry about your situation. The strategy with this incoming cash is to consider whether or not it will be there when you will likely need it, i.e., volatility. Of course, putting it all in (highly volatile) VTSAX and waiting 30 years will, statistically speaking, produce the best result ignoring other factors. That being said, you want to be able to weather a storm without decimating your savings in the event of, say, a job loss and a market downturn, which are highly correlated.

Do I invest all of it in VTSMX at once?

I would say "no". Fill up an emergency fund first, to hold in cash (by which I mean an instant access, high yield account, like a money market (currently returning 2%), then fill up your portfolio according to your desired asset allocation (bonds, stocks, etc.)

Do I invest $10k each month, or is that playing at market timing?

Yes, it is market timing. If you can stomach the volatility and have enough cash to ride out a downturn, you should put it all in at once.

All that being said, in your situation, given the changes going on in your life, I might be inclined to sit on cash (in a money market account) for a while until I have a clearer idea of what my post-divorce life is going to look like.