Where to park some money

So my wife is getting a nice inheritance - well into six figures. After a little vacation and a few dollars into my car building fund, our plan is to first pay off all our credit card debt, then do some long-postponed structural improvements to the house. What to do with the remainder we do not know yet. Pay down our mortgage perhaps? Anyway, for some time we need to park the money where it will be safe and fairly fluid. What do we do? Just toss it in our checking account? Or are there better strategies? It would be nice to see some appreciation, but I don't trust the stock market enough to put it there.

Interest rates are crap and will stay that way for a long while yet. I'd buy some real estate.

Paying off unsecured debt is a great first choice.

If you're paying PMI then paying down the mortgage enough to get rid of that is a good idea, but beyond that it's less obvious.

Putting it all in a checking account is not a great choice either, they pay basically nothing.  There's probably a lot to unpack in "I don't trust the stock market", but things like S&P 500 index funds have historically been a great way to build wealth.

You might look around and see if you can find a "fee for service" financial planner.  This is someone who will look at your financial situation and goals and develop a plan for you to execute on.  You pay for his time, but you handle the investment side of it yourself.  This avoids the conflicts of interest inherent to a financial planner who is also a broker and thus has an incentive to "churn" your account and charge you lots of transaction fees.

Real estate (one of the reasons why it is so crazy now), but it's not terribly fluid.

Porsches, if you have a place to store them.  Maybe a bit more fluid.

Not really any easy options for what you are looking for, a lot of people are looking for the same thing trying to figure out how to keep inflation from eating up their savings.

A market index fund might be the best option.  It doesn't seem like the market is going to take another dip?  Obviously still a bit of a risk.

In reply to aircooled :

I can second buying Porsches 

Take a look at TIPS funds if you want someplace to park it temporarily without losing a bunch to inflation.

Javelin said:

Interest rates are crap and will stay that way for a long while yet. I'd buy some real estate.

My wife and I have been talking about this too.  We're considering buying a future retirement home, but using it as an investment until such time as we're ready.  We've got enough money that we wouldn't be paying PMI.  My concern is that the housing market is so crazy right now and prices are so high.  What do you think about the possibility of the housing bubble bursting in the near future?  I'm presuming it won't be as bad as it was in '08, but still...  If we bought a house worth $xxx,xxx today I'd hate for it to only be worth 70% of that in a few years.

Oh, and I second the Porsche idea.  My garage/driveway concurs.

I'd pay off the house and debt.  Take your payment amount and shoot it into an investment you like.  I also like both of you barreling 15% into your work 401k.    I know many will say not pay off debt.   What if you got sick? Or your wife?  Not gonna happen?  It could?

Two months ago my buddy was active driving a truck.  He got Covid and it took him down yesterday.   You never know.

At this point in the market, buying real estate isn't a good investment. Two years ago would have been, but currently you're better off paying down your mortgage once you do the calculations on how long a term/balance is left vs interest paid on top of principal until the end of the loan. The difference is usually a nice ROI when comparing to investing it in an instrument which pays you an interest rate over time. There are many schools of thought on paying off a mortgage early. I personally like to know that the place I work in and where I lay my head in the evenings are paid for. It's comforting.

There is no safe, liquid option that's going to keep up with inflation so you have to prioritize. Sitting in a bank is safe and as liquid as can be, but it's going to be eroded by inflation. There are other options, but they're less safe, and/or less liquid.

A low interest mortgage can be a great hedge against inflation, but that assumes you'd be putting the money someplace with the potential for higher return. If you're wary of equities, that's probably difficult.

You could go the opposite direction and put the money toward paying off your house too. You'd lose the potential inflation hedge, and it's not very liquid at that point, but you'd basically be guaranteeing a return equal to your mortgage rate, which is far better than anything you'd get from a bank.

It's free money and you don't want it in the market. So put it in a separate savings or checking account and leave it there til you figure out what to do with it. Boo hoo no interest, they say. Who cares? It's free money. It'll lose value due to inflation, they say. So what? It's still a E36 M3-ton more than you currently have.

personally, I'd pay off revolving debt first, then do something fun, then pay off something else, then do something fun, but I'd try to keep about $20k available for the typical oh E36 M3 stuff that comes with home ownership.

Javelin said:

Interest rates are crap and will stay that way for a long while yet. I'd buy some real estate.

Not right NOW I wouldn't.

Yes, pay off all unsecured / revolving debt. As said above, pay your mortgage down till you don't need PMI, then cancel it. If you're past that already, look at your interest rate and decide if you want to do more.

Get an Excel spreadsheet of mortgage amortization and see how it pays out if you pay off early. Even a low rate compounded yearly for another 20 years adds up to a lot of money saved by reducing your balance.

Kreb (Forum Supporter) said:

Anyway, for some time we need to park the money where it will be safe and fairly fluid. What do we do? Just toss it in our checking account? Or are there better strategies? 

How long is 'some time'?  If it's relatively short term (say within the next year or so) I'd just put it in a bank account. 

Yeah, if "some time" is less than 5-6 years, then you're pretty much looking at savings/money market accounts or CDs unless you're willing to gamble some of it in the market, and it doesn't sound like you are.

Porsches are more liquid than houses, but both of them incur transaction costs that you would have to take into account and both can't be reasonably liquidated within 48-72 hours. So if the idea is to keep your powder dry until the right opportunity comes along, you're looking at savings as a parking spot.

Right now I wouldn't really look at real estate - the Fed just raised rates which has already affected mortgage rates, and there are more raises to come, allegedly. House prices haven't really caught up yet to the higher mortgage rates from what I can see as they are inversely correlated, so it's a really bad time to buy. Not to mention that house prices have been even more out of whack than usual in most parts of the country for the last few years.

Housing market is over inflated and due for a correction.

Let's be honest, we're staring down another recession. Will it be like 08? Personally I suspect much worse because the amount of debt we're carrying now is considerably higher. 

Stock market is long overdue for a correction, and extremely volatile in the short term due to evening going on in the world. 

Banks aren't paying E36 M3.

Buy cars, or become a landlord. Car values are also overinflated, but, the right vehicles are always in demand to people who don't notice the financial problems of common folks. Meanwhile, apartments, trailers, duplexes can provide steady revenue, and if you can do work or can afford to pay someone to do the work there are still deals to be had on fixeruppers

AngryCorvair (Forum Supporter) said:

It's free money and you don't want it in the market. So put it in a separate savings or checking account and leave it there til you figure out what to do with it. Boo hoo no interest, they say. Who cares? It's free money. It'll lose value due to inflation, they say. So what? It's still a E36 M3-ton more than you currently have.

personally, I'd pay off revolving debt first, then do something fun, then pay off something else, then do something fun, but I'd try to keep about $20k available for the typical oh E36 M3 stuff that comes with home ownership.

Thank you, erosion due to inflation is not happening on 6 figures at a rate that justifies not having it liquid if your plan is to use it.

Pay off revolving credit, pay down mortgage, have fun.

The unique of your situation is that you have "cash."  If you want to play property, I would focus on buying some homes that can't be financed.  Many houses have these issues.  They wont be glamorous houses.  They usually need to be bought and then have more dollars put into them to make them "finance-able."  

Buy, improve, make finance-able, then sell.  Or, if not then sell, keep it and rent it out while getting a loan on the place for yourself.  Now with the cash-in-hand form that loan, find another and keep the cycle going.  

In reply to John Welsh :

I think you are onto something. 
 

I'm doing something similar right now. The only thing I would add is that I would look for cashflow instead of growth. 
 

An "adjustment" (or crash) is quite possible in the near future. It could affect values of nearly all things people typically invest in. 
 

The deal I am involved in involves buying real estate, but I'm really more interested in the cash flow (rents). I will do very well, even if the property value dropped to zero (which it won't)

However, real estate is definitely not liquid. 

chandler said:

AngryCorvair (Forum Supporter) said:

It's free money and you don't want it in the market. So put it in a separate savings or checking account and leave it there til you figure out what to do with it. Boo hoo no interest, they say. Who cares? It's free money. It'll lose value due to inflation, they say. So what? It's still a E36 M3-ton more than you currently have.

personally, I'd pay off revolving debt first, then do something fun, then pay off something else, then do something fun, but I'd try to keep about $20k available for the typical oh E36 M3 stuff that comes with home ownership.

Thank you, erosion due to inflation is not happening on 6 figures at a rate that justifies not having it liquid if your plan is to use it.

Pay off revolving credit, pay down mortgage, have fun.

Inflation was over 7% last month, and isn't really showing signs of slowing with energy and fuel prices rising since then. That would mean keeping the cash in a bank would cost $7k for every 100k sitting there. It might still be worth that depending on OPs priorities and willingness to pursue other options, but it should be considered. When $100k turns into 93k without spending any of the money, that's not great.

Datsun310Guy said:

I'd pay off the house and debt.  Take your payment amount and shoot it into an investment you like.  I also like both of you barreling 15% into your work 401k.    I know many will say not pay off debt.   What if you got sick? Or your wife?  Not gonna happen?  It could?

Two months ago my buddy was active driving a truck.  He got Covid and it took him down yesterday.   You never know.

Being 100% debt free is so freeing I can't express it into words. Nothing hanging over your head is fantastic. And if something happens, one of us can work a minimum wage job to pay the utilities and taxes if needed. I recommend removing debt and learning to live free all over again. 

There is no right answer if you follow the advise of others.  You need to know what each option has as good/bad.  For now, put the money somewhere safe, FDIC insured bank and make sure you keep the account balance below 250K.  Online banks are great, they offer the best rates.  Learn about their security and how to make your PC safe so you can sleep at night.  Now get more education on finances so you make choices you are comfortable with.  Too many people out there are making more than you or me by talking others into investing with them.

What I did-pay off the mortgage, do some things to the house that needed doing.  Put 20% into my IRA, taking the max tax deduction each year.  I play with the market, did pretty well until the last 3 months but probably lost less than others.  I make the risks I am comfortable with and don't get greedy.  We spent 5% on toys, bought a used truck and travel trailer to enjoy.  One more thing, if you pay off the mortgage have a plan for the extra available cash every month.  You can splurge some of it but remember to do something smart with most of it.  I learned a new car in the driveway or expensive vacation gives you a warm feeling but so does a fat bank account.  And it doesn't depreciate.

House prices are nuts, real estate prices are not. Commercial spaces are dirt cheap, vacation/airbnb type places that can't really be lived in long term are reasonable, and land is flat unless it's a hill. Don't buy a second house just because, buy some land you could retire to or a little cottage on a lake or something. 

Index Fund.  If you want lower risk, balance it.  If want to to invest in realestate without dealing with realestate crap, look into a REIT.

2nd choice would be real estate property like AirBNB, if the market isn't insane wherever you look.

Start a small race team. Lemons, AER or chumpcar are my recommendations. Gridlife if you're looking to do sprint races. Stage rally if you don't want the concern to be around for an extended duration. 

In reply to Javelin :

This x100 I'm closing on 24.68 acres before the end of the month with mixed zoning in Maryland and I picked it up for less than 100k. And it's flat with road frontage and perked.