Inheriting $250K and looking for some financial advice?

Question

I am a 21 year old male college student currently living in North Orange County. I am preparing to inherit about $250,000.00 from a family member's estate, and I am somewhat unsure of what to do with the money. I am a full time student, and I only work a few hours a week. I profit about $10,000.00 max annually from work, so I need to make a significant return in order to pay my annual bills, which total about $20,000.00 right now.Here are some key points to consider:

- I do not have any school bills to worry about. I am studying to receive my BS in Business Administration and I will graduate by 2009.

- I have about $10,000 in debt - mostly medical bills - which I plan to eliminate immediately.

- I have extremely poor credit at this point in time, so I'm assuming I should avoid investments such as real estate which will yield a high interest rate every month.

- I need to purchase a car, and I plan on buying a used car in the neighborhood of $20,000.00 - $25,000.00

Answer 1

Last comment first: if you are going to buy a used car, spend about $12k. Seriously. The second you buy it, it starts depreciating...don't let your new found "wealth" burn a hole in your pocket...and don't get caught up in the "try to impress" thing. It is a losing battle.

Second-Pay off the debts immediately. Not only the $10k in medical bills, but the balance that you say totals around $20k. That debt is accumulating interest at probably 18% annually...so dump it!

Third- Why are your bills so high? Are you including apartment, utilities etc? If so, then $20k sounds reasonable...if not...I gotta ask again: Why are your bills so high?

Fourth- Don't go to a "stock broker" or anyone else who gets paid only when they make trades in your account. Their obligation is legally to the firm they work for, not to the client. Stay away from them!

Fifth- If you can keep working, excellent. That $10k you make knocks your $20k in living expenses down to $10k per year. You should be able to generate $10k a year from your $250k, even after paying bills/debts and buying the $12k car that I recommend.

How to invest it? Go to a financial advisor...a money manager. Someone who is paid LESS THAN 1% to manage your money. Anything more than 1% annually is way too high. They will recommend a strategy of various diversified mutual funds which will end up giving you good growth over the years...and hopefully they can give you guidance when you have more questions. Good luck!

Answer 2

Congrats. I would suggest you see an hourly rate financial advisor. They $200-500 you spend will more than be saved by avoiding loss of money. First and foremost, don't go out and blow it all - you'll regret that. I'd see the advisor before spending a dime, and that includes the car. Except the medical bills, which agree you should pay off pronto. Also, if you have credit card debt, it's a no-brainer to pay off, but don't then go out and rack up more debt.

Stocks/bonds don't care about your credit rating - they pay the same amount to everyone.

Not sure about the tax implications of your position, but if you can get $200 into a savings account risk free at 5% (e.g., ING, HSBC Direct), that's $10,000 year (taxable, though), in addition to your $10K for work.

Good luck.

Answer 3

Get the obvious stuff out of the way first: The taxes on the money, buy the car you want, pay off credit cards, etc. THEN, fix your credit. Hire a company that does that. DO IT NOW. Trust me, you WILL need it and want it as perfect as possible later in life. Good credit = freedom for you to do what you want and purchase what you want at any point of your life.
Buying a car where you actually have payments would help your credit tremendously, you are so young that you hardly have any credit history to speak of. You can buy cars lately with 0% financing, which means you dont pay interest, but that steady payment will be great in establishing your credit and cleaning it up.
As far as investments go, China mutual funds. You cannot go wrong. China is one of the biggest mass consumer countries in the world and they are rocking and rolling with their business, just starting to get "Americanized" after they got out from under their regime. Everything is China right now, my mutual fund made 40% return year to date (compare that to Citibank's 5% yearly, or Edward Jones 4.5%, LOL)
The economy in China is booming more than anywhere else in the world, the 2008 Olympics will be held there (which is huge for American companies that have interests there), Survivor China is being filmed there, shows that were huge in america are now being shown there (the china version of American Idol broke records). Do some research on line to get informed.
If you dont go the CHina mutual fund or stock router, I recommend putting the bulk of that money in a high interest CD, something like 6% APY, and compoud your interest. Let your money MAKE money for you.

Answer 4

After paying the immediate and other bills ,
(And that is toooo much for a student car)
You should have $200K left at least .
A CD yield of just over 5% would give you and extra $10,000 a year and when you graduate ,
You would still have the full $200K principal to go forward with .
Do your investing homework on yahoo finance (under the investing tab is an education link / free ).
In a year , you should be wiser about investments and can move beyond CDs .

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Answer 5

The absolute FIRST thing you need to do is go to a professional tax preparer who can estimate what taxes you WILL have to pay (inheritance tax) on your next tax return. That will be a big chunk - trust me. A good tax advisor should also be able to give you advice as to how to deal with the rest of your money to keep future taxes low (such as putting some aside in an IRA, charitable contributions, etc..).

Best wishes.

Best wishes.

Answer 6

Will you be having to pay inheritance tax ? ( find out ) If so a big chunck of 250K is gone bye-bye, Consider investing the amount you can in a retirement plan to avoid taxes also. Invest all you can but remember that 5% yield against 4% inflation is not making much. So get your degree and join us out in the ratrace as soon as possible

Answer 7

Let's make it short since you don't have that much time to waste. Here is what i would do if i was you : I'll wait for that check to come and then i will purchase an airplane ticket to France or Spain or Italy to get a new life since there is no future in America for someone young. Your people have done so much bad stuff around that soon with the help of the incoming economic crisis most of your population is going to starve, crime is going to rise,...etc. Take your money and leave for Europe, study there and get a girlfriend and a life because i don't see any future for someone educated like you seem to be when reading you. I don't hate particularly America i am just being honest with you. I spent 6years there when Mr Clinton was president and i can hardly imagine what the situation is going to be like when Bush leaves office.

Answer 8

I am a Portfolio Manager with over a decade of experience in the Stock Markets and I really think you should hire an expert like myself to increase your wealth to at least $2,500,000.00 USD.

I also suggest you to use your money wisely by going to Ivy League to get an MBA after graduation.

I also suggest you to buy a used $10,000.00-$12,500.00 car.

I also suggest you to apply for a Visa, MasterCard, American Express and Discover to increase your credit (Just don't use any of those Credit Cards)