WWYD If you came into a large sum of $$$$

[harbie]

I was wondering what advice you all have for someone that came into a large sum of cash (and no it's not me ).

I'll give you the basic info on the people and the $.

DINKs- double income no kids
Car loan- guessing it's around 20K
CC/LOC- aprox 7K
No mortage. They rent cheap currently.

The cash is in the area of $200,000. It is from an inheritance.

What do you suggest they do with it after they pay the "debt" they have off ?

I know the obvious answer is invest but where? in what? Should they buy property such as a condo and rent it out??? Just looking to pass on the info.

Thanks

[linnyeg]

If it were me I'd be buying a house to live in.

[MrsSunshine]

Invest in a house for sure, secure a good amount for an RRSP if they haven't done so. stocks/bonds etc.

[jayne_a]

I would put half on a house, and the other half in to rrsp's (that's after i bought myself matching purse and shoes. )

[ellis123]

First piece of advice: conserve your principal -once its gone its gone and you need principal to earn money. Do not pay off any debt lump sum unless they are about to take you to court. Pay debt from interest earned on principal. Buy a property if you can maintain and upkeep but with principal like that you can find an investment that can pay you $10-15,000 per year. If you can live frugally on that with your other income you can retire and kiss you boss goodbye

[Natalka]

Pay off current debts and buy a house.

[roseofblack25]

If I came into that money I would put half away as a down payment on a place and the other half to taking care of living expenses and bills.

I just started a lease and have 11 months left, so I would be stuck until next year anyway. I would let that money collect interest for the rest of the year and start looking for places when I had around 4 months left of my lease and hopefully find something perfect so I wouldn't have to pay such high rent.
Though if it really were me that just won that kind of money or inherited it, I would give my parents 50,000 first because they are struggling a bit with health stuff and I would want them to have the money more than me really, but they already own a house so I would want to still have 100,000 or maybe 75000 to invest in my own place and then the other portion as savings to help pay my bills and school. If there was any money left from savings and interest and I knew I could do it, I would help my sister out with her loans too once she graduated.

I've been dreaming about winning the lottery since we found out both my parents have pretty serious health issues...I would love to be able to just hand them over some money so they could tell disability and all those other government programs to stick it because they are set for life...That would be pretty awesome.

[kerrylj]

The CC debt would be and would not start again. CC debt is the highest of the debt they have. Then looks to get a house with some and then put the rest away. If they do have usable RRSP room then that would give them taxes back that would give them more $ to put more money away neext yr as well (gift that keeps on giving)

If they can afford it getting to the place where they are debt free is a very good goal.

How old they are and how close to retirement also makes a real difference. Are they going to need money in the future because the may have kids or are they in their 40-50's and not going there.

[MortgageQueen]

Hmmm. I agree with Ellis123 but kerrylj has a good point too. . . It would depend on how old they are.
Rich people generally use their money to borrow "cheap" money.

[harbie]

Thanks for all the advice. While they couldn't buy a house for that here they could do a condo or at least make a nice down payment on a house.

Im not 100% sure about their RRSP situation.

They are early to mid 30's and I doubt kids are in their future, but who knows

[hollyquaiscer]

I would say it all depends on your age, but given their situation, I wouldn't be to concerned about paying down their debt as it's not a lot considering they have no mortgage (assuming they have the average income, or higher). I would say it would be a great idea to invest the money in a 1 year GIC or similar. Take the year to look around, save some additional monies, then perhaps find a nice place that they could put the 25 - 30% downpayment, then rent it out for some extra income.

The balance should be left in a safe investment, hopefully that would earn them a decent interest. That amount of money at one time is hard to come by, and it would be heartbreaking to see it blown away on shopping and life's wants. Someone worked very hard and saved very hard to get that money, and I think that when a person is lucky enough to receive such a fabulous gift, they should treat it with intelligence and respect.

[ashedfc]

Use your money to make money (recurring monthly income).... & use a part of the money to buy a big permanent (whole life) life insurance policy .
& then live on the recurrent income (pay bills/interest on debt/etc...)

This way you still have the money (& maintain full control over it); & you are using the proceeds from the recurrent income to live a very comfortable lifestyle..
On death your kids/g-kids are guaranteed a huge inheritance from the life insurance proceeds.

I disagree with buying a house: cause you will be buying an overvalued asset, which can loose value (there's a very high probability of housing market going bust in Canada)..
As far as paying debt... I disagree too.... because if you can service the debt at a very low interest cost, why pay off..

[harbie]

On death your kids/g-kids are guaranteed a huge inheritance from the life insurance proceeds.

Only thing is they don't have any kids and are not sure they ever will and it won't be passed onto any neices/nephews (loooong story)

I disagree with buying a house: cause you will be buying an overvalued asset, which can loose value (there's a very high probability of housing market going bust in Canada)..

I do know that they wouldn't be buying in the current market due to the need for a market correction. They would be waiting it out for a bit so it's just a matter of what to do with the cash in the mean time.

[ashedfc]

in that case... do they have any debt (if yes, then what's the structure of the debt, amortization, interest rate, etc)..
if not then,
Keep the money aside (& to ensure its protected from market loss, volatility, inflation, taxes, etc, etc... each one has to be dealt separately)..

In my opinion atleast 10-20% or more of the money should be in Gold. (just as a protection against inflation & Govt's fiscal policy madness of too much sovereign debt across the globe, & more so in the western world).
Rest you can hold into various asset class...

[itchy54]

I would max out TFSA and RRSP's (if there are no pensions involved), pay off any high interest debt and sit and think about the rest. There are some online banks that offer a 2% daily interest savings account (outlook financial, achievia finacial and more). When interest rates climb again, and they will, house prices will likely fall....buy then, as long as they are happy renting now.

To be honest, this just happened to us. A very nice inheritance from someone we thought had nothing to give...a very generous surprise. For us it means we can easily retire next year if we want....an amazing feeling!!

I would NEVER buy a whole life insurance policy.....being debt free is the best insurance....