What's the smartest thing to do with $50,000?

Question

With $50,000, what would be the best thing to do?

Here are some things I've come up with:

A) Pay off my debt, mom's debt, and sister's debt with about $15,000-$20,000 left over

B) Put all the money down on a new house for me and my husband since we are living with parents right now and have a low house payment

C) Put all the money towards a college education for myself which would definitely pay for the first 4 years. (I'm 23 and haven't started college due to financial reasons)

D) invest some in mutual funds or stocks whch I know nothing about

Advice please? Thanks!

Answer 1

Just my opinions but:

1. Your mom and your sister are responsible for their own debts. 50k is not a lottery winning amount. Right now, you are young, you have several different priorities and a huge opportunity, and major needs, and the last thing you can afford is to take on 10's of thousands in debt from family members. Do they work? Do they have their own homes? Do they need to be paying for school as well? I don't mean to sound harsh, but I hope you see where I am going with all this. You can help them alot more if you insist on it, by getting a degree and making alot more money down the road, than if you sacrifice it all now.
I hope they are not expecting this of you. If so, they are very wrong.

2. The house is a not a bad idea, but if you put it all down, you won't have it. You'll be paying about 6% in interest of course, which isn't much. You could get into a house and have mortgage payments, but then, that's really another debt that you'd need to chase for a very long time, plus all the costs of home ownership. Trust me when I tell you it's a moneypit. I swear. If you haven't even gone to college yet, your earning potential will make it that much harder to get the house paid off, if ever.

If it were me, here is what I personally, as someone that has gone to school, scrimped and saved, been poor, also done very well at times, have invested in stocks, mutual funds, options, cd's, and a house would do:

Major point first:

Your earning potential if you go to school is dramatically more than if you don't go to school. In fact, it's more than triple (lifetime total - not the starting out wages) the average for a non-college worker. This is something that will be true for the next 40 YEARS (unless you do so well that you retire early.). It all depends on what you study of course. If you study art history, music, or english, you'll learn some neat stuff, but don't expect to make much more money than if you never went to college.
You could cap out around 30k with no degree in a country full of degrees, or, you could end up at 40, 60, 80? on up later on in your career, depending on what you study.

Being happy and doing something you've always dreamed of counts for alot more than making a ton of money, but many degrees can get you positioned to do both. Some ideas: engineering, architecture, business/finance, or computer sciences.

So, I would:
Go to school. Put aside 6 months of expenses in your bank account. Open an account at a discount brokerage firm like Charles Schwab. Don't go with a tiny outfit, don't go with anyone that is full service. Full service brokers make money by selling you stuff, not by investing your money. Invest the rest in some very conservative mutual funds. Don't pay some professional broker to tell you what mutual funds are good. Pick up Money Magazine and read a few copies. PIck out a mutual fund guide. They are everywhere. Go to a newstand and pick out some financial magazines and read them. You have enough brains to make your own decision on this. The really good conservative mutual funds don't vary that wildly. Stay away from stocks for now. There's too much variation and risk in individual companies for what you are doing.

Then, figure something out for living arrangements. If you are 23 and married, with 50k from somewhere, you don't actually need to be living with your folks unless you just want to be, and even then, the nice thing would be to be paying them rent and something for addition expenses like electricity and phone, etc. Maybe you are, but it's not relevent here and now.

Figure out what you'd like to do with yourself, professionally. Then, pin down where you need to go to do it. If you want a degree, I'd find a good state university (they are usually very good and compare favorably to zillion dollar schools). A BS degree from a state university is still a BS.

Then, apply, pay your fees and go. As far as living arrangements, If it were me, I'd find a very small home to rent (or buy on a 3% down FHA loan) in a neighborhood that is made up of old homes and old people. They are usually low on crime and very cheap. A 50k home would cost you 2k to get into. Don't pump more into it. You'll need it for school and you'd probably never see it again anyway, until you sold the house, and then, it might not be at a profit.
The goal here is not to make money in real estate, it's to live as cheaply as possible while you are in school. In fact, if it were me, I'd probably find get a used mobile home in a decent mobile home park somewhere (they exist.)

Make school your ultimate and highest priority or you will not finish. I swear this is true.

Keep in mind that if you aren't interested in a college education, there are other possibilities that don't take so long.
Some examples:
real estate license. X-ray tech certification. licensed practical nurse. Registered masseuse. Physical therapist. Home Inspector. Home Assessor.

Good luck with your decision.

Kevin

Answer 2

I think you first need to talk with your husband and together decide what is the best option since the decision will impact both of you.
A). Paying off debt can be a good idea but you also need to consider what is the interest rate. If it is low debt interest, then you probably could earn more other ways such as investing. It is very kind to consider you mother and sister but also be sure that if their debt is the result of poor spending habits on their part then do not re-enforce their reckless habits which are likely to continue and you wil just be out that money.
B). You and you husband most likely desire to eventually move out into your own home, but it also sounds like you have a good arrangement now. Just remember that your home is a place to live and take your time since more homes are coming on the market with defaults and prices could still come down depending on where you live.
C). College is definitely important in the long term if you plan to work or just want to learn. You may want to consider whether you want stay home with children in the future. Try to find an area you enjoy although remember you can still make adjustments throughout your career. This choice could impact where you live, especially when later looking for a job, so you need to talk with your husband to decide together.
D). Investing is another good idea, I would look for a low cost mutual fund such as Vanguard. If you just want to follow the general stock market, you can buy a fund like the Vanguard total stock market fund. As with many investments, you can lose money; however, stocks have historically outperformed CDs, money market accounts, etc over the long term - time is on your side. If you choose this option, you should consider putting $4K in a Roth IRA for you and $4K in Roth IRA for your husband since under current law they will not be taxed when taken out. (Note: You and your husband must earn at least $8K combined in order to put $8K in a Roth IRA). You can learn more on the Roth by just searching the internet - Vanguard or other fund families would also help you if you contacted them
I guess most would consider this a good dilemna. You have already come up with four very good options and hopefully I have given you some more things to consider in making your choice. There is no one answer fits for all. Remember that sometimes you can choose a little from several options rather than only one choice. I would prayerfully consider what to do if it were me and I pray the best for you and your husband.

Answer 3

I think you have a great plan. However, if you work either part or full-time, I would open an IRA ahead of investing in mutual funds. And put a down payment on a house, not all the money. If you can afford a house payment. But put it towards a college education before that. Definitely pay off bills first.

Answer 4

If you don't have problem living with your parents that's ok to stay with them it will even save you more money . If you really want to buy a house depending where you live some areas 50K is nothing but as an investment by all means buy & have it rented out you can either break -even or pay just a little amount on the mortgage then wait for the equity to grow at least 5 years returns are way better than traditional bank.
Stocks would be good I would say use only $10,000 My philosophy in investment look for securities that are leaders in their sector or always been stable for the number of years , monopolize the market ,Products people use frequently etc. ex Clorox , Coke ,Boeing , Autocad (ADSK) ,Strabucks .Avoid speculative stocks or company you never heard off . Education is very important ! but you don't have to blow-off your whole savings.Check out your local city college for cheaper education & simply work your way-up once you are inside the career you want. Help your mom & sister out at least a portion of it & trust me God will bless you in whatever investment you want to be in .

Answer 5

You should do the same thing with $50K as you would with $40K or even $30K for that matter.

Suze Orman says wait 90 days, and then blow 10% of it on things which dont help your future. (this is the category of helping friends and family unfortunately--trust me, even if you dont pay all their debt, $5K each can get all their minimum payments paid for for 2 years while they pay down principle-only).

Let them pay down their own bills, you just help them out by paying their interest and minimum payments.

The rest of the money depends on your specific goals. Are you the college-type? If not, dont spend money to just go to college only to graduate haphazardly only to find the "miracle job" you thought exists won't materialize.

Also Suze Orman would DEFINITELY advise you to shield the money against your husband in case of a divorce. Put the money in your parents name or a close friend. Why take combine your marital risk with a financial risk. Worst case is that if your husband and you dont work out, your loss is compounded.

IF AND ONLY IF you decide you want to invest long-term (more than 10 years), then I advise a Van-Guard Mutual fund. They are "low fee"--the money a company charges for managing your money.

There is no shame in putting all the money towards a down payment on a house, if you are reasonably prudent with your financial affairs. However, do you have good credit? If not, then maybe you are not quite a financially prudent person.

Here is my advice to you based on your credit score.

If you have bad credit-- sink all the money into a down payment on a house. You are likely to squander the money if it is in a mutual fund because you can cash-out anytime, just like closing a bank account. Do not pay off any of your credit card bills, or debts, or others debt.

If you have fair/average credit, then you should pay off all your debt, and make a reasonable promise to stay financially responsible, rip up your credit cards, download your credit report and starting building good credit. Invest some of the money into schooling, invest some in your family's debt, but let them pay down principle, you just help the minimum payments + interest.

If you have good credit, then I advise the 10% blow, 40% to invest long term in mutual funds, and the other 50% is entirely at your discretion. Keep up good financial habits and definitely advise getting a bachelor's degree in a health-services job. The health industry is the #1 growing, and highest paying, and has the most widespread labor deficits, which translates into stable and high paying jobs. If you get your act together, you may very well have the start to a very prosperous life.

Good luck and god bless

Email me any time

James Kelly, CFP

Answer 6

Education. Get a degree in a profession like engineering, accounting(finance), medicine (pre-med or nursing) or law (pre-law). The other fields don't make much money. Take the money, go to a good school, get a degree and you will start a rewarding career. The $50k investment will have the highest return with the right education. Once you have your career going, get out debt if you have any, get a house, and then help family if you want. But I would encourage you to seriously start planning retirement savings as soon as you get a career going. Good luck to you.

Answer 7

Pay off the debt, and put the 20,000 into a self-directed Roth IRA, choosing large-cap growth funds with historic yields (past 10 years) in the 10 - 13% range. Let it sit until you are 65 and you will have 1.28 million dollars in the bank to retire on (plus anything else you picked up along the way in your life/career). "Social security? we don't need no steenkin' social security"

Do not buy a car or any other depreciating asset.

.

Answer 8

Pay off your debt fist. Split it up for a down payment on a house, save some back for an emergency. Pay off some or all your mother's debt and some of your sister's debt.

Answer 9

Pay off your own debt.
Pay for school.
Stay debt free.
After you have a good job thanks to your education, then you can be in a better position to help mom and sister out of their holes.

Answer 10

Each one of your trade has to be profitable with high leverage. If you invest in penny stock and if stock shoots up then you know