What would you do with $50,000?

Question

I was in a car accident about 6 months ago and had a fracture in my lower back. I wasn't driving and I didn't sue the driver. My back is healing slowly and I’ll be 100% sometime soon. His insurance agents and my insurance agents came to an agreement and are giving me a $50,000 dollar settlement.

I’m 22 years old. I have a brand new car. As a college graduate I make a pretty decent salary for my age. I was wondering what someone in my situation would do with that kind of money. No stupid answers like "give it to me". I’m asking hypothetically. If anyone has well financial knowledge please give me some advice. Obviously I’m going to indulge, and buy a couple nice things for myself.

Okay for the people who are passing judgement on me like no other. The "brand new" car was a gift. I was fortunate and my parents bought it for me. This question was for financial advice and most of you gave me what I wanted to hear. To the slim few who misinterpreted what I was asking and started to criticize me hard, dont bother answering if your just going to waste your time making me feel like im young and dumb. All I wanted was good information about Cd's and retirment plans and some information about interest rates.

For the others who asked where I reside. I live in Queens, New York.
I appreciate all the people who took time to answer this question in full seriousness.

oh and by the way im not in debt. I dont let my credit card go over 300 dollars a month.

Answer 1

Set aside the money you want to spend -- make a list, check it, review it with people to see if it's logical, and then take the remainder and invest it. Investing in land, paying off your mortgage quicker, etc are all good ideas.

You could also buy some mutual funds, stocks, or commodities and get a portfolio going. Maybe try buying a CD.

Municipal bonds are a good, low-medium yield (but tax free!) investment choice.

Finally you could put the money into an account for the future, maybe a Roth IRA or even a college account for your future kid(s) if you're planning on having any.

Definitely spend some, though. If you're getting 50 grand, then I think 5k or so would be fun to spend -- take a trip, buy some nice stuff for the house, etc. and feel good about putting the rest away.

Answer 2

INDULGE? Already you're planning on pissing it away. Well that's a 22-year old for you. So you have a brand new car? So what? That "brand new car" will be junk in 6 years. If you had any financial sense, you'd know that cars depreciate, not appreciate in value. Yes, as a college graduate you may earn a pretty decent salary - as long as you can work.

So you think you'll be "100%" sometime soon. Maybe. So you'd better put the money in the bank in a savings account and KEEP it there. Why is it burning a hole in your pocket already?! Are you so impatient to start spending it? What if you DON'T get back to 100% soon or ever? I am so sorry to hear that you let the insurance agents determine your amount and your fate; you should have had an attorney guiding you and of course they didn't tell you that! What if you have back problems for the rest of your life? I know to a kid like you it sounds like a lot, but if your back is affected for the rest of your life often amounts are closer to $160,000. You could easily go through $50,000 just in one year due to doctor appointments or prescription meds. Sure, at 22 you have youth and a strong body on your side -- now. Watch what happens in a few years. This fracture can trouble you later.

DON'T touch the money. You may well need it later down the road. If you absolutely must spend it on something, why not put it down on a house? That way, if eventually you become disabled, at least you will have a roof over your head.

Signed,

20 years experience with a fiance who's had 5 back surgeries inluding a fusion

Answer 3

That money should be put into an interest bearing account. If you injure your back again, the insurance could claim pre-existing condition, and make you pay out of pocket, so that settlement money is there to take care of future problems with your back. I would not spend a dime of it. I would do just as I suggested above.

Many people sue Insurance Companies and Work Comp thinking they will get rich, and never have to work again. That is the stupid thing to do. The money you make in a lawsuit like that, is supposed to be there to take care of any future medical problems related to the injury, because most regular medical insurance or medicare will not pay for a re-injury of that same area.

10/26/07 10:00am: I hope I didn't offend you, I didn't mean to insinuate that you got the money in a lawsuit or anything like that. I was just giving an example of what can happen when some people get money from an accident related injury. I have seen many people get money like this and blow it on frivolous things, and then re-injure themselves, only to get their care denied by their health insurance because it is considered a pre-existing condition. If you don't re-injure your back in exactly the same place you will be ok, or if it is a very long time between injuries, then your ins may pick it up. I would definately put the money in some type of interest bearing account, that you can access if you need to in the event of a re-injury. It's better to be safe than sorry. You sound like a very intelligent insightful person, and I commend you for wanting to do the right thing with your money.

Best of luck to you, and again, I apologize if I offended you. Just trying to give some helpful info.

Answer 4

The magic of compound interest at 6% a year can magic it into a sum that will let you retire early - but it takes time. Don't buy depreciating assets is the basic advice. Houses, Art, Antiques and stocks - but only the certified best - will grow in value. Getting an education will also pay dividends. Learn a language, or art, or skill that'll last you a lifetime. Also a pension, given 40 years and that money would provide the backbone for a pension. I would invest it in stocks personally or a pension, shares that pay dividends can let you keep capital whilst given some cash. Oil and mining has gone mad in the last few months. Any other goods, cars, TVs all dust in time, although a good Holiday somewhere different is something to treasure.

Answer 5

You need to begin to build wealth. This is your seed money.

If you have debt, consider paying it off. If the funds won't cover the debt, use as much as possible, but keep a few thousand back for emergencies.

Invest what you have in a good, growth stock mutual fund with a 10-15 year track record. Try and get a 12% + return. Keep in mind that, using the rule of 72, you can compute how long it would take to double your money 72 divided by 12 is 6. Your 50K would double in 6 years. At age 28, you would hvave $100K, at age 34, you'd have 200K.

Think long term and act your wage.

Answer 6

You should take 4K and invest immediately in a ROTH IRA. Then at the beginning of the new year you should make your 2008 contribution.

If you want further education a 529 would be a good idea.

If you do not need money for further education and think you will be in the same area for 5 years, I would think about buying a house. I would look for a place that you can rent out for the mortgage payment in case you move earlier than your time frame.

Answer 7

I was reading some stats the other day that said smart young people are starting to save for their retirement. I know that's a long way off for you, but they do say Social Security may not be available when you reach 65 or 67 as the age will be starting next year. It wouldnt hurt to divide the money up into either a bank with a good rate of interest or get yourself a financial adviser. I dont know where you live or what the cost of living is there,but it also couldnt hurt to invest some of the money into a place of your own. It's definitely a buyer's market right now. Carpe Diem. I admire you for not thinking about just blowing the money. You know to be careful of people who want you to invest your money in one of their schemes. Do a total investigation before you give them a dime.

Answer 8

Since it takes about $50,000 to get started with an investment program, I'd do that. You already said you have a pretty decent salary, let this be a good start to financial stability.

Problem is with getting some high end electronics is next near it will be obsolete or some jerk will break in and steal it. Or your house will burn down. If you really must part with some of it, travel. Go to Australia and see Ayers Rock. It's suppose to be some guy thing anyway. Go swim with the sharks. Swimming is good for bad backs.

Answer 9

Stick the max you can in a roth IRA for 07 and 08. Invest those IRA's in a low fee index fund like the vanguard 500. Whatever you have left, invest in a vanguard 500 mutual fund. Make sure you reinvest dividends. Then forget about it for 20 years. If you don't need it now, you wont miss it. At the end of the 20 years you should have over 200k

Answer 10

Spend no more than $5,000 on fun stuff, use the other $45,000 to pay off any outstanding debt first, and then invest the max you can into an IRA. Use whatever is left to create another avenue of income, could be investments, starting a side business, real estate whatever floats your boat.