Source
r/personalfinance•
CSOctane2020

Questions About Windfall Plan- Did I Plan this Right?

Investing

Hello, 3 months ago I received a large sum from an accident. I used the windfall chart here and lots of researching to establish the following plan:

Received 109k from an accident. Paid off:

20k High interest student loans (5.8 - 8%)

5k CC debt

12k Roth IRA (2019 and 2020 Contributions)

15.2k in a 3 fund Brokerage account ($14.5 upfront 3 months ago and so far another $700 during the recent dip)

Currently sitting on about $58sh left.

Looking to invest $30-40k in 6 month-2 year CDs ranging from 1.75-2.15% returns or an online 1.8% high yield savings account. This will be for a house (or any other big life purchases) within the next 2 years. I live in a Low Cost area. I'll just ladder the short term CDs/add ot my high yield savings or invest more in the market if I find I have extra time.

That will leave $18k-$28k .

12k of that will remain liquid in my current Credit Union for emergency.

Trying to figure out what to do with the last $6k-16k. I have a lease ending soon and plan on using some of this as a down payment on a 3 year old SUV (live in a very snowy area) with 24k miles on, 4.5k down and finance the 17-18k balance at 4%.

This wipes out nearly all my debt, sets me up with an additional 27k + (brokerage + Roth) to grow in the market the next 30+ years (currently 31 YO). I also currently max out my 401k company match.

Can anyone let me know if this was a decent plan?

Posted Mar 4, 2020, 7:55 PM UTC · edited

46
DonkeyCopterr​•

Looks fine. I'd personally go with the HYSA just for the flexibility versus the CDs since the rates are pretty similar at the moment.

6
Java_Junior​•

how does one go about determining which HYSAs are good / trustworthy? My wife is extremely suspicious of online banks (for no reason other than she's not good with computers) and we are trying to park our life savings somewhere other than a Chase savings account.

2
lucky_ducker​•

This is very similar to my course of action when I received a windfall (sadly, my wife's life insurance). Paid off all but mortgage debt, caught up on deferred home maintenance, fully funded two years' Roth IRA contribution, and put the rest in a Schwab brokerage account. Today, that brokerage money is split between stocks and a $30K CD ladder, with a little over $12K in the prime money market fund (SWVXX). Going from living paycheck to paycheck to actually having a plan - and reserves - is incredibly liberating.

If you have cash you really don't know what to do with, put it in the money market fund while you learn more about investing. You will eventually find a home for it.

2
user8437​•

This is pretty thoughtful.

If you want to optimize a little, you could bag the CDs, drop ~$45-50k into a HYSA, treat that as emergency + house savings, and invest the remaining $8-13k in that brokerage account.

This depends a little on whether you have a specific timeline and/or price range for a house. If you know what you want and when you want it, keeping the money out makes sense. If you just have a vague, "I might want to buy something in the future" sense, it might be more efficient to just let that money sit somewhere with some growth.

But that's all nitpicking. Your plan is a good one.

2
BVethos​•

Seems like a lot in the HYSA / CDs. Are you planning for a home down payment that I missed when I skimmed initially?

edit: doh, reread. This all looks fine!

1
Gravity-Rides​•

You just got out of debt, have some money left over and are planning on financing a vehicle?

If you pay for a vehicle with cash, you can get a sweet 3 year old SUV, no payment and not have to carry full coverage insurance. I would probably just buy a SUV outright and use that extra cash flow from no payments / lower insurance and direct it towards maxing your 401k.

0