what would you do with 20k cash

[xxxflhrci]

Re: what would you do with 20k cash

But I understand TD's sentiment.

If you can do this, it is a great idea.

Pay off your mortgage.

Set up an automatic withdrawal for the same amount as your mtge payment to a new bank account that is not attached to your bank card. Get the best interest you can but the big key is paying yourself back the mtge that you were paying, and gaining the interest on it.

I did similiar...I paid off my mortgage, early at that...13 years instead of 30. Anyway, I had became accustomed to living a certain lifestyle off of a certain amount. When the mortgage was gone, instead of going hog wild with the extra cash, I had the amount that I had been paying in mortgage taken directly from my check and put in a 457 plan.

 

[mthieme]

Re: what would you do with 20k cash

Xmas for the grandkids.
Cut down 6 dead oaks which are 20' from the house.
replace rotted rafters in kitchen and walls in adjacent pantry.
That outta 'bout kill it all/

 

[levittownnick]

Re: what would you do with 20k cash

I like Tacklewasher's plan.

Many of us quit smoking, but few, myself included, put the saved cash into savings. It's so easy to blow the difference.

 

[arboldt]

Re: what would you do with 20k cash

Several choices.

1) No matter what you do with the $20k, your wife has got to get her spending under control.
RECOMMEND: a) Attend a Dave Ramsey Financial Peace seminar. b) pay off the credit card accounts c) cut up those cards and *cancel* the accounts. Keep one (known only to you) and keep the card for emergencies where only you know where it is.

2) You can't pay off the mortgage in total, so you won't see any immediate benefit. Still, when we received an inheritance a few years ago, almost all went to the mortgage. That meant we paid is off in 10 years rather than 30. It took 3-4 years after that, but having it free and clear is a great feeling.

3) Check out Money Magazine. Each month they list the top-yielding bank savings and money market accounts. My credit union's money market account is insured, and pays almost as much as the other people's money market accounts. It also pays better than most CD's. Go figure, but that's where we went. Compare the earnings from this to what you'll save by paying off accounts [step 1].

4) Only after you have a 4 - 6 month reserve nest egg should you consider anything else. I'd take 10% - 20% of what's left and set it aside for fun, and invest the rest.

5) The financial and stock markets are really scary right now, but that's when you make money -- if you can afford it and have the guts. If you have the time and interest to read some financial magazines (libraries are a good place to do this). Otherwise, a good financial advisor could help. I know of 3 spread across 3 states that I'd trust. Often, your employer's 401k administrator has reasonably good advisors. Remember that if you do the same as everyone else, your actual returns will be slightly below average (due to fees). I could tell you how I invest, but your situation is not mine, so it wouldn't fit you.

Good reading: Money Magazine, Kiplinger's, Consumer Reports Money Advisor [can't remember exact name]. Introductory information or tutorials available from fidelity.com, troweprice.com, vanguard.com, ...

Just remember *no* *one* has your interest at heart as much as you do. If something doesn't make sense to you, don't do it. You'll miss a few winners, but you'll also miss a lot more disasters.

 

[captquest]

Re: what would you do with 20k cash

Easy....

1. Pay off the wife's credit cards. Then cut them up!!!
2. Pay the rest onto the mortgage.

Every financial adviser I know, or have heard on the TV, says that the best thing to do is to pay off all the debts first, starting with the ones with the highest interest rate. Then, and only then, do you start playing with investment.... You have no idea how nice it is to live in a house that you own!!

Chris...........

Dave Ramsey would tell you to pay all debt except the house, then set aside an emergency fund equal to three to six months of living expenses, then invest the rest into Mutual Funds and retirement. How the heck do you get a boat Dave? Isn't that an emergency?
http://www.daveramsey.com/radio/home/

 

[Kiwi Phil]

Re: what would you do with 20k cash

Some pretty good suggestions here, but the biggest problem you have is your old sheilas attitude to credit cards.
(hee..hee...hee...)

Pity you can't get her to work on a budget with that type of spending....as in, if her budget is $100 per week, and her 'must have' item is $500, then she accumulates 5 weeks budget and then spends with her actual money and not her credit.

I find it amusing when people refer to these cards as "credit cards" because they are not......to the person that uses them, they are "debit cards", because debit means debt and debt means you owe and have difficulty paying, because 99% of the time, you just spent money you never had.

Sgt M knows what I am talking about....you get that explained clearly to you in the 1st day of B Com study and you deal with it every day of your working life...one of the basic 5 principals says "credit what comes in, Debit what goes out".

Anyway my suggestions for the 'lump sum'.....kill your mortgage with it.....don't get clever and calculate the finer details of 6% going to the mortgage or coming to you in interest....that's all B/S.
Just get that mortgage gone and experience the freedom of making critical life style decisions that suit you and not having to concern yourself with fixed commitments for-ever

Another point.....if you invest it, you may find over the years you will dip in to it for things like paying off the credit card etc.....and you will just eat it away.Lump sums don't fall in our pockets very often, so put the brain in to gear 1st..... and keep it simple.

Cheers
Phillip

 

[RubberFrog]

Re: what would you do with 20k cash

Use it for a divorce attorney and get rid of the "sheila" before she runs the cc up so high you end up living in WalkAbout Creek with ol' Mick.

 

[RubberFrog]

Re: what would you do with 20k cash

I find it amusing when people refer to these cards as "credit cards" because they are not......to the person that uses them, they are "debit cards"... one of the basic 5 principals says "credit what comes in, Debit what goes out".

I hope you didn't learn that in an accounting class, because that is not the way it works- at all.

To increase an asset, you debit it. To decrease an asset you credit it. To increase a liabilty, you credit it. To decrease a liability, you debit it. Debits on the left, credits on the right.

What does this mean? It means that credit cards are just that- a way to add up liabilities (debts). Every time you charge something you can't afford, you are in essence crediting a liability account for yourself. When you use a debit card, you are debiting another liabilty account. The difference is that this time it's not YOUR liabilty account. It's the liability account on the banks books (ie the money they owe you).

This is confusing to a lot of people. Just remember, whenever you create a liability (a "credit") you are creating an asset (a "debit") for someone else. And vice versa.

Don't get confused by it all. Credit/debit cards are just cute names that financial institutions came up with for people that don't know the difference in the first place. Accountants hate those names.

 

[stevenw00]

Re: what would you do with 20k cash

don't get clever and calculate the finer details of 6% going to the mortgage or coming to you in interest....that's all B/S.

I'm thinking that if someone is going to put enough effort into asking for opinions about what to do w/ some money, that they are willing to put the 10 minutes into seeing which investment mathematically makes the most money for them. You call it BS, most people call it common sense!

Do you keep all of your money in a checking account or do you put some into higher interest accounts/investments? There is no difference between that and this.

 

[hazwild]

Re: what would you do with 20k cash

Just give the money to me and i will buy a bigger boat. Problem solved

 

[snapperbait]

Re: what would you do with 20k cash

Buy about 20 more acres in the "wind belt"...............

 

[Lurker Lou]

Re: what would you do with 20k cash

I hope you didn't learn that in an accounting class, because that is not the way it works- at all.

To increase an asset, you debit it. To decrease an asset you credit it. To increase a liabilty, you credit it. To decrease a liability, you debit it. Debits on the left, credits on the right.

What does this mean? It means that credit cards are just that- a way to add up liabilities (debts). Every time you charge something you can't afford, you are in essence crediting a liability account for yourself. When you use a debit card, you are debiting another liabilty account. The difference is that this time it's not YOUR liabilty account. It's the liability account on the banks books (ie the money they owe you).

This is confusing to a lot of people. Just remember, whenever you create a liability (a "credit") you are creating an asset (a "debit") for someone else. And vice versa.

Don't get confused by it all. Credit/debit cards are just cute names that financial institutions came up with for people that don't know the difference in the first place. Accountants hate those names.

Gawd how I have missed you Latex. There are two kinds of economist in the world. One says a penny saved is a penny earned. The other says a penny saved is a penny not spent. Which kind are you?

 

[bootle]

Re: what would you do with 20k cash

Buy about 20 more acres in the "wind belt"...............

For that price, it depends where in the wind belt.

Good to see that you're still around Snapper.

 

[Kiwi Phil]

Re: what would you do with 20k cash

Stevenw00

If I had a mortgage, then $20k come along that I could invest, I would pay it off my mortgage.

$20k invested @ 6%= $1,200 yr, which would add to my income for tax purposes, and if taxed at 25%, I would pay $300 of the $1,200 interest, in tax, leaving $900 which= 4.5%.
I would probably spend the $900 on something.
I would probably dip in to the principal from time to time, until it was gone.
If I didn't, then every time inflation moved things up, my $20,000 would loose a little of its value.

Now if I paid it off my mortgage which was at 6%, and kept the repayments at the same level:
I would save myself a full $1,200 in interest immediately, and it is tax free.
That would continue every year...no paper work....no tax returns....no managing......nothing to do.
As more of my repayments go toward decreasing the principal, that savings is excelerated quickly. That $1,200 saved every year may double inside 5yrs....like rolling a snowball down a hill....the bigger it gets, then it gets really big really quickly.
It would also give me a lot of control over my life....I could make decisions that are good for me.....not having to 'stick out' a situation because i 'have commitments to the bank'.

I firmly believe the wisest investment a wage or salary earner will ever make in their life is freeholding the home they live in a quickly as possible.
The tortise always wins.

It is like investing in yourself...not with someone you don't know....who dosn't want to know you....and when things go wrong don't care what happens to you.
Aren't there a lot of Americans in that situation at the moment?

For my situation.
I have been in business for over 30 yrs.

I maintain a $5,000 operating float in a cheque account, and top it up to $5,000 every wednesday (banking day).

I remove the surplus to a low bearing interest rate 100% secure account, called V2....it must have a min of $5,000 at all times.

I have a Cr Card with a $5,000 limit which I use for accounts I can't pay by cheque, and I reduce the balance to zero every wednesday (banking day).

I have a another Credit Card with a $500 limit, and when QC buys something for me, I go and put the funds in the Cr Card, then make the payment. That account always has a zero balance.

When we want anything bigger that household expences, it comes out of the V2 interest bearing account...and if the money is not there, then we don't have it....so when the wife wants a new car, or I need bucks for that building project I mentioned in another thread, we save hard, get the V2 up, then buy.

I have been doing this for over 30yrs sucessfully.

I have lost money.....on shares.....with mutual funds...with hair brain investment schemes....even did big bucks on an American Stud Stallion I got talked in to a syndicate 25yrs back (buggxr dropped dead before his 1st outings with the girls). I did $50k plus my share of air freight and quarantine.

That is why I treat all these fancy schemes as B/S.

Something:
nice and simple,
no paper work or documents or maintanance
idiot proof,
gives you 100% control,
invests in yourself,
fail proof, and
gives you greater control over your life

is the advice I would give.

I'm not really grumpy Steven (I can't use the icons)

Cheers
Phillip

 

[mthieme]

Re: what would you do with 20k cash

Wow.
Impressive.
I'll bet you're the life of the party.

 

[stevenw00]

Re: what would you do with 20k cash

I'm by no means an investment guru, and have VERY little in investments myself... I'm going off of what I've seen and heard, and am trying to look at it logically. A lot of what you say makes good sense. There are a few issues I see w/ it though.

One of your first points was that you'd "probably spend the $900" and that has to be thrown out. This is about investing or paying on something at this point, and everything I'm commenting on would require discipline. In all honesty, if I got $20k right now I'd pay off the new/used car we just bought and go buy a Polaris Rzr, but that obviously doesn't make much sense for most poeple and isn't the best "investment" I could make.

If you put the money into investments that aren't nearly as liquid as a money market/secured account, then you aren't nearly as likely to "dip in" and take a little from time to time, and your potential for growth is much larger (almost gauranteed to out pace inflation.)

My understanding for tax purposes (I'm still a 1040EZ guy till next year) is that unless you're paid dividends then you don't pay taxes on it, so depending on your investment, you're not paying those yearly taxes that you talk about. Yes, there is a risk in investments, but that is where the money is. W/ me only being 29 yrs. old I can risk a little more than someone closer to retirement, but as long as you have a balanced portfolio it doesn't make much sense to just throw your money into a 3% money market and let it sit. Everyone should be "risking" a little money at least, and since the $20k doesn't sound like necessity money (sounded like a one time inheritance or something) then it is ideal for investing since it isn't accounted for.
I don't own a house at this point, and will be buying within the next year (a lot of why I got into this chat was to learn, more so than to give my opinion) so I don't know what tax benefits there are to owning a home, but I have heard from a number of people that although it is great to own your home, you lose a ton in tax deductions. I've even been told that it is better to pay everything else off and make sure you have a small house payment, strictly for tax purposes. How much truth is in that, I don't know because I haven't seen the numbers. My understanding is that the tax benefits it opens up is greater than the cost of maintaining the loan (interest.)

Like I said earlier, I am not a investment guru at all, but over the next year I plan on buying a house and really getting into investments. My wife and I (been married a month today) are debt free w/ the exception of the Honda Fit we bought on Friday and it will be paid off w/in the year (we're thinking 6 months, but it is a very low interest loan for only $10k.) We have systematically eliminated credit card bills, then my higher interest truck payment, my Harley payment, and will soon wipe out the car loan. We won't have a huge down payment on a house, but should be able to put down some money and w/ the market like it is, we feel that we'll get good value out of our purchase.
Are we doing everything right? I don't know... but we're debt free w/ the exception of the car, my truck is still in great shape, we each have a motorcycle, and we have a boat and four wheeler. I'm not bragging about what we have, I'm just saying that we've managed to get the things we want, and that they are in good shape so they should last us a long time, and they're PAID FOR.
Hopefully if there are things we need to learn about investing we'll learn them before it is too late (starting w/ from this thread.)

Thanks guys!

 

[BF]

Re: what would you do with 20k cash

here's my $.02... having $20K show up is a very nice thing, but carrying debt on credit cards is just plain and simple.... stupid. We use cards, but the whole balance gets paid off every month... period. If there is month where some big unexpected expense gets put on plastic, we have a line of credit secured by our equity (below prime) that is used to pay off the plastic for the month. Goal is to never, ever pay credit card company 18% on your purchases.

My suggestion would be to pay off the wife's card first (that's definitely where you're getting the most benefit for your dollar), but do so on the stipulation that wifey agrees to never again carry a balance on the plastic. See if she can understand what a waste of $$$ those interest charges are. If she makes good money, why isn't she completely paying off what she puts on plastic??? Answer has got to be that she's spending more than she should be. So you clear them off (again) and tell her the deal that if she doesn't pay them off completely every month and ends up with any interest charges on the statements, the cards and accounts go away permanently. Have her find the money and make the payment. If you do it, it disconnects the act of purchasing on plastic from the reality of having to pay for all that stuff in a few weeks. If she doesn't agree, maybe you should suggest that together you go see a credit councilor. If she won't "get it" from you, maybe hearing it from someone else will change her behavior. Doesn't she see carrying a balance on plastic as a big problem??

If you're in a "your money" and "my money" type of relationship, and the $20K is "your money" maybe you should consider protecting yourself somehow in case your relationship falters sometime in the future. Do you want to pay off the mortgage for a house which may be split down the middle if you ever split up? If you do split up, chances are you're probably gonna be getting 1/2 of "her" accumulated credit card debt. A judge will probably not be making the distinction of his equity vs. her debt, there is just a ledger of assets and debts for you as a couple.

Anyway, like I said $20K is a great thing to have show up... but the credit card thingy sure sounds like a very bad omen to me.

thats my $.02 (actually more like $.04)

 

[ilmostro99]

Re: what would you do with 20k cash

A lot of people here are a lot smarter than me, however, I wouldn't worry about paying off the house yet. If I'm not mistaken, the 6% is tax deductible, the credit cards are not. If you don't have at least 3 months salary in reserve, in case of hard times, do that first, then pay off credit cards. Keep at least one credit card for emergencies and put it in a ziplock bag full of water and stick it in the freezer. It will still be there if needed, but not easily accessible. Go to the bank ONLY once per week and pull out enough cash to cover your wife and your weekly expenses (lunch, an occasional cup of coffee, etc.), say $100 each per week each (or what ever you can afford). That is all you get. you cannot go back for more. Whatever you don't spend, that is that much more for the next week. Don't lower the amount. By having extra money at the end of the week, and more to spend the next week, it teaches the benefits of saving.

Debit cards are almost as bad as credit cards. You don't actually see the money leaving your hands. Just think of how much lower our taxes would be if the people had to write a check every month for taxes instead of having them automatically deducted from your paycheck.

It takes a little effort for this to work, but whenever things get tight, my wife and I resort to this plan, and we not only get through the tight times, but are amazed how much extra money we have at the end of the month. I'm in the same situation as you. My wife makes WAY more money than I do. It makes it a little more difficult for you to set the spending rules. Somehow, you have to get her to understand how bad debit is. Don't say this explicitly, but punish bad behavior (Debit; "we cant go out to dinner, the credit cards are too high") and make sure you reward good behavior, ("We have no debit, let's celebrate by going out tonight"), the latter being the most important.

Erik

 

[INJUN]

Re: what would you do with 20k cash

I'd take a cruise and make some memories somehow. You can't take it with you.

 

[mthieme]

Re: what would you do with 20k cash

Whew, Thank you. For a while there I thought everyone was taking the fun out of daydreaming.
I'd like to hear from T2Fish on this one.