How To Invest A Sudden Windfall

If you’re fortunate – or unfortunate, depending on how you look at it – you may one day experience a sudden windfall.

A windfall is an unexpected cash injection, usually in the form of a settlement from a lawsuit or an inheritance.

Throughout the course of my life, I have seen a number of people come into a considerable amount of money, only to squander it. They spend the money on things like shopping sprees, buying a brand new car (or cars), and giving to family members.

Once your purchases are driven by emotion, it is almost a foregone conclusion that you will not make smart choices with your newfound wealth. Here is a real life example:

A couple I know of was awarded $1,500,000 in the early 2000s. The first thing they did was go to Fifth Avenue in Manhattan and go on a shopping spree at some of the most expensive stores. They bought two cars and moved to Florida.

Now, buying real estate is never a bad idea if you suddenly come into money. However…financing a property, at the height of the real estate bubble in 2006, can become a bad idea.

Instead of paying straight cash, as I would have, this couple financed a $300,000 home that proved to be a disaster. They also spent a great deal to furnish their home, as well as thousands on landscaping.

Within a few years, they had almost depleted their windfall.

To make matters worse, the $300,000 house they mortgaged was underwater. That means the amount they owed was more than the house was worth.

Eventually, they ran out of money and had to move back to New York in order for the wife to find a job.

This is a very unfortunate series of events – but a very common one among people that come into a large sum of money.

What would I do with a windfall of $1,500,000?

Here it is, plan and simple:

  • Half of it, $750,000, is going into the stock market. Listen: one million dollars is not a lot of money any more. I might be able to 10X the $750,000 over the next 20 years, bringing me to $7.5 million.
  • I’d use $400,000 to purchase a business that generates positive cash flow of at least $10,000 monthly. My first goal is to become financially free, i.e. not have to go to work at a job anymore.
  • $100,000 would go into a college fund for my daughter.
  • I’d put $250,000 into real estate.

A sudden windfall can be very exciting indeed. Unfortunately, most people squander the money because they simply don’t possess financial literacy.

If you come into money and don’t know what to do, do nothing. Seek out financial advice from someone you can trust. (Hint, they’re usually not broke.)

And when you’re ready to invest, I’d be honored if you bought my beginners’ guide and/or reached out to me for help!

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)

Advertisements

Don’t spend $450 on a pair of sneakers. Here are 10 stocks you could buy instead.

As some of you may know, I currently have a day job.

My job is to help displaced individuals find employment. I don’t help them find their dream job…my purpose is to help them find a job.

Yesterday, I met two young adults, back to back, each wearing a pair of sneakers called  Yeezys.

In case you don’t know, Yeezys are sneakers made and marketed by Kanye West. They retail for $250 – for the lucky few that can find them. The demand for these sneakers is so high that you will most likely have to pay a lot more than $250 for them.

On the secondary market, these sneakers are flipped to people like the two candidates I saw today for $450 a pair. When I learned this, I almost fell out of my chair!

To make matters worse, these are individuals at the lower end of the pay scale. My interaction with these individuals inspired me to write this post.

If you are planning on buying a pair of $450 sneakers, let me give you ten stock ideas to buy instead that can pay off big time in five to ten years…

1. Illumina (NASDAQ: ILMN): the gene sequencing giant.

2. Roku (NASDAQ: ROKU): the over the top (OTT) operating system for streaming video.

3. Apple (NASDAQ: APPL): the most valuable company in the world.

4. Tesla (NASDAQ: TSLA): the pioneer of the electric car movement.

5. Nvidia (NASDAQ: NVDA): the leader in artificial intelligence (AI). Has its hand in every major technology platform in the future.

6. The Trade Desk (NASDAQ: TTD): a pioneer in digital advertising.

7. NIKE (NYSE: NKE): one of the most recognized brands in the world.

8. Lululemon (NASDAQ: LULU): maybe the most innovative company in apparel.

9. MasterCard (NYSE: MA): one of the dominant players in digital payments.

10. Facebook (NASDAQ: FB): whether you love Facebook or hate it, it and Google have a duopoly on digital marketing – and that dominance is not going away any time soon.

 

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)