What to do with an extra $750K?

[Anonymous]

Anonymous wrote:

Anonymous wrote:I get a large chunk of my pay in an annual bonus so I spend a lot of time figuring out what to do with windfalls. I always max out the tax advantaged savings accounts first--IRAs, 529s, etc. There may be a day where we don't need to do that, but I'd rather over save than under save. I'm 34 and I think it's smart to save as much as possible for college/retirement early because you don't know what the future holds. You can always cut back on savings if you feel you have more than enough.

If I were you, assuming you're maxing out your 401ks already, I'd put $11k into IRAs for you and your DH. Then, I'd do max $14k per child into a 529. It's a lot, but this is a one-time windfall. It may be the only time you set aside a significant amount of money in savings for them. Even though you're not worried about college funding, this is still a good use of money since the savings are tax advantaged. If you want to save more aggressively, you could each put $14k in a 529 for $28k per child. That's what we do with my annual bonuses right now.

After that, I'd pay off your DH's student loans. I wouldn't bother with yours since the interest rate is so low. Might as well take your time paying off that one. Then, get the car with $20k cash.

Assuming the net amount is $400k, you still have ~$330k (or $275k if you put $28k into the 529s) left. Shore up your cash savings first and then do the addition. If you have to finance a part of the addition, I'd go that route rather than blowing all the cash on a project that could be financed through a HELOC or construction loan at a low rate.

Regardless, if this comes through, it sounds like you'll have plenty for the addition you want and savings. Good luck!

^ great advice!

This is the the worst advice ever. The OP is coming into a windfall, and you guys are giving her advice that keeps her in debt or worse, puts her in MORE debt

[Anonymous]

I would pay off all debt and then move into a better house.

[Anonymous]

"This is the the worst advice ever. The OP is coming into a windfall, and you guys are giving her advice that keeps her in debt or worse, puts her in MORE debt"

I'm the pp who wrote this and would like to add - instead of these options,
1) pay off your student loans, all of them
2) pay off your mortgage

You are now debt free in DC with a comfortable HH income. Congratulations! Now, take the money you were putting towards your student loans and mortgage and start aggressively saving for your addition, your new car, and your children's tuition.

[Anonymous]

Anonymous wrote:"This is the the worst advice ever. The OP is coming into a windfall, and you guys are giving her advice that keeps her in debt or worse, puts her in MORE debt"

I'm the pp who wrote this and would like to add - instead of these options,
1) pay off your student loans, all of them
2) pay off your mortgage

You are now debt free in DC with a comfortable HH income. Congratulations! Now, take the money you were putting towards your student loans and mortgage and start aggressively saving for your addition, your new car, and your children's tuition.

We dont have enough to pay off the mortgage and the loans - mortgage balance is approx $300K and our rate is low, like 3.5%.

[Anonymous]

Anonymous wrote:"This is the the worst advice ever. The OP is coming into a windfall, and you guys are giving her advice that keeps her in debt or worse, puts her in MORE debt"

I'm the pp who wrote this and would like to add - instead of these options,
1) pay off your student loans, all of them
2) pay off your mortgage

You are now debt free in DC with a comfortable HH income. Congratulations! Now, take the money you were putting towards your student loans and mortgage and start aggressively saving for your addition, your new car, and your children's tuition.

And hope and pray that all that money you just plowed into loans and now is illiquid doesn't suddenly become horribly necessary to you in that time you are building reserves back up.

[Anonymous]

Yup. 9:36's original advice is solid. Don't pay off the cheap money if you think you are going to need cash. Don't pay off the mortgage if it's a good rate and you can still take the mortgage interest deduction.

[Anonymous]

I want to know what 2007 car needs new transmission. I am buying a new car and want to avoid that, for sure. No snark, just serious.

[Anonymous]

Anonymous wrote:I want to know what 2007 car needs new transmission. I am buying a new car and want to avoid that, for sure. No snark, just serious.

probably any american car

[Anonymous]

Anonymous wrote:There is a chance DH will be making an extra $750K due to a deal he is working on. Normal HHI is approx $180K.

Nicely done

I would pay off debts first.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I want to know what 2007 car needs new transmission. I am buying a new car and want to avoid that, for sure. No snark, just serious.

probably any american car

Actually, its a Hyundai Sonata. We are pretty annoyed about it and since we got it used in 2008, I dont think we are covered by the warranty, even though we are well-below the 100K mile warranty.

[Anonymous]

Anonymous wrote:"This is the the worst advice ever. The OP is coming into a windfall, and you guys are giving her advice that keeps her in debt or worse, puts her in MORE debt"

I'm the pp who wrote this and would like to add - instead of these options,
1) pay off your student loans, all of them
2) pay off your mortgage

You are now debt free in DC with a comfortable HH income. Congratulations! Now, take the money you were putting towards your student loans and mortgage and start aggressively saving for your addition, your new car, and your children's tuition.

I would agree with this. No better feeling that being debt free and controlling your own destiny.

Worst case, your kids borrow some money for their education, but take some of the stress out of your life and free up some cash flow. The only exception to this, I think is the house. Get the house the way that you want it with the addition. At current rates, if you plan to stay there for the long term - get things the way you want them and if you have to borrow a bit to do this, fine, rates are in the dirt.

We have gotten to the point in our lives where we have very little debt, just a very manageable mortgage number and speaking as somebody who used to have a ton of debt, of all different kinds - school loans, CC bills, car loans, consumer credit - it feels GREAT to now owe anybody

[Anonymous]

I would pay off all the student loans -- why hang on to them at any price? Arguing that one of them might die before their paid off is a bit extreme.

1. Pay off student loans
2. Buy minivan
3. Max savings for the year
4. Set aside 9 months expenses in an emergency fund
5. Start on the renovation, matching the work to the money left

[Anonymous]

Your #1 biggest thing to do is to consult a tax accountant and a lawyer to discuss with the source of the funds to structure the payments to minimize tax liabilities.

A few hundred dollars in consulting fees here could save you hundreds of thousands of dollars.

I am not talking about cheating on your taxes, but the laws are there for you to know and follow. A large lump-sum payment for someone who otherwise is in a low tax bracket is one of the worst-case scenarios.

[Anonymous]

Instead of $130K on an addition, I would just buy a new home. Additions rarely give you returns on the amount spent at the time of sale.

[Anonymous]

Pay the 6% student loan.

Sell your current house and with the extra cash from the windfall just move to a "W" school feeding district.

Pull out kids from private schools.

Make do with older car and less bathrooms if need be. You will be saving $40 K on schools alone.

My $0.02 cents.