Sophie,sophie wrote:Hi Frugal,
Yes, bring back your distinguished-person avatar! Here's my list of what to do with a windfall...delightful question to tackle on a weekend morning.
First things first. I'd remodel my kitchen. That's because I want to do that and have been saving for it, but don't quite have enough in the kitty yet.
Then I'd pay off the mortgage, even though many would say this is not a financially wise thing to do. I don't care. Being debt free is priceless. (Same goes for any other debts you might have.)
The rest gets invested. If it's not that much money I'd pitch it all into the PP, buying the assets in equal proportions. If it's still a large amount, perhaps you could put part of it into your PP (assuming you still have that) and do something else with the rest. Options are:
- buy a vacation home or condo and rent it out on Airbnb, to develop an alternative income source. You get to enjoy it when it's not rented!
- Consider it a "VP" and buy something speculative: a stock or fund, bitcoin, whatever strikes you as something that could go up a lot. Put in auto sell orders if it drops a set amount, like 10%, to keep from losing too much if you guess wrong.
- Consider it part of your core investment portfolio but use a different portfolio strategy. Lots of options on the Bogleheads wiki. Pick one, put it in place, and DON'T CHANGE IT. Constant tweaking will only result in buying high/selling low syndrome.
If it's enough money to allow you to retire and maybe move somewhere you'd rather live permanently, then I'd either go 100% PP or the last option above, and have at it.
Congratulations by the way!
How might your answer change if the windfall put you in a position of having investment assets equal or greater than 50x your annual needs? In fact, in a scenario like that, would you use the PP at all? After all, you'd have the staying power to ride out market swings over extended periods and benefit from a low% withdrawal rate. One of your interesting earlier posts inspires this question. Thanks,