What to do with an extra $750K?
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Anonymous
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There is a chance DH will be making an extra $750K due to a deal he is working on. Normal HHI is approx $180K. We do ok on the $180K but we have 4 kids, all in parochial private school, so we have high expenses.
After taxes, I assume it will be closer to $400K. Here are the things we'd like to do. $130K-150K - home addition (we only have 3 bedrooms upstairs and with 4 kids, its tight. We'd like to add an addition for an extra 2 bedrooms and a bath) $56K - my student loan balace, but interest rate is only 1.75% (worth paying off with that kind of interest rate?) $40K - DH student loans, interest rate 6% $20K - buy new/used minivan (prob a 2011-2012)- 8 seater (currently have a 7 seater 2007 minivan and a 2007 sedan that needs a new transmission) College savings? Regular savings? Would it be crazy to spend $200K right off the bat? We have never encountered this kind of money and dont want to be dumb about it but also would love the opportunity to do some major improvements in our life. We dont care about fancy trips or clothes or any of that kind of thing. |
Anonymous
| That is a pretty low estimate for an addition. I would take care of the 6% student loans right off the bat and then sit on the money for a while and figure out what else to do. |
Anonymous
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I'd probably put $200K into college savings. For my one kid that's a chunk of change, but for your four that's barely a dent.
Then if you want to pay off loans and do an addition or get a car, use the rest of the money. Remember additions cost MORE than their estimates. |
Anonymous
| Vegas is calling... |
Anonymous
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Congrats on the windfall. If you're in the DC area that's a pretty low budget for an addition of that size. Get some estimates, you might be surprised.
Definitely pay off student loans and if you need a new/used car, get it and pay cash. Do you have a safety net emergency fund? If not, consider whether you want to have a fairly liquid 3, 6 or 12mos worth of living expenses in the event that something happens to one of your jobs. |
Anonymous
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We've already gotten estimates for the addition at $125K, so I was estimating up. We wanted to do it for a while and before this extra money ever came up, we got estimates just to figure out a ballpark of what we were looking at.
Given that we are currently paying private school tuition for the kids and we will be able to use that towards college, I am less concerned about paying for college. I also dont mind them working, going in-state, and taking out loans. They are young, so we'll be living in this house for the next 12-17 years and without an addition, it will be very tight. |
Anonymous
| Half of your 750 k will be taxed so you would net 375, welcome to the messed up us tax system |
Anonymous
| We have a small emergency fund and will probably set aside at least $100K for emergency funds as well. We are relatively young (35) and have a decent retirement plan as well and also not concerned about saving extra for retirement - we'd rather enjoy the next 20 years than the 20-30 years after that. |
Anonymous
Well you seem to have it all figured out. Why are you asking for advice? |
Anonymous
I am just laying out my plan. Asking advice bc it may be a bad plan, may be factors I havent considered, may have other ideas... |
Anonymous
Not really. |
Anonymous
| What you've laid out seems reasonable to me. Nothing super extravagant, and all things that will improve your daily quality of life. Getting rid of the student loan payments and not having to worry about a car payment if your older car dies also frees up money every month moving forward that could go back into retirement, college, future tuition increases for the kids, etc. |
Anonymous
750k is the top bracket of income |
Anonymous
| I would say pay off student loans, and consider opening a business or investing the rest so that you can make more money from it. |
Anonymous
What a nice "problem" to have. I would do as you have said.  I would pay off the student loans- that way the monthly savings you have for your budget from here on out and the psychological value IME is astounding. I would do the addition- you need the space now. Buying the minivan is good too- again you won't have to add in the loan amount to your monthly budget. I would splurge on a great vacation with $15-25k of it (depending on where you go understanding that airfare for 6 is expensive). I would put $25k in each child's college fund. College is much more expensive than parochial school. I am assuming you have already have 6-12 months of expenses in an emergency fund (otherwise that is first on the list). Do you make donations? For us we would donate $75k+.
Your ideas sound fine and practical to me. |