Financial Fellow

Written by J.P. Wicklein

     What would you do if you had an extra $100,000?  Take the vacation of a lifetime?  Throw it all in the bank?  Put an addition on your house?  Donate some of it to charity?  Here’s what I would do with $100,000:

·      Pay off my $5,000 credit card balance

·      Spend $5,000 on a nice, long vacation for myself and my girlfriend

·      Give $5,000 to my friends and family  (Friends would get a nice dinner while family would receive cash)

·      Donate $1,000 to a local charity  (Yes, I know that’s only 1% of the money.)

·      Spend $1,000 on clothes  (I need to update my wardrobe.)

·      Set aside $3,000 to spend on whatever I feel like buying in the near future

·      Reserve $10,000 for my future life with my girlfriend  (Money that can be used for a downpayment on our house, an engagement ring, or a wedding)

     After that I’d still have $70,000.  I could use that money to pay off my $18,000 student loan balance, however, the interest rate is so low that I’d rather keep the loan.  Instead, I’d put the remaining $70,000 in a savings account or laddered CDs. 

     With $70K in the bank I would feel more comfortable about buying the things I want (within reason) and not worry about whether or not I can afford the purchase.  If I lost my job, and had no other source of income, I could live off that money for 2-3 years.  Although conventional wisdom states that you should have at least 3-6 months of short term savings, 2-3 years worth buys you much more peace of mind. 

     Even in the current environment of low interest rates, I could still earn about 3% on $70K through CDs or a high interest savings account.  That’s an extra $2,100 a year in income from interest.  Wouldn’t it be nice to generate an extra $175 a month without having to work for it? 

     I can understand the desire to spend most of the money on a luxury car, bigger house, or a once-in-a-lifetime vacation.  Those purchases can bring you happiness.  As I stated above, I plan to spend some of the money.  Still, putting $70K into savings buys me something more valuable than any material purchase.  It buys me some freedom.  Specifically, it buys me the freedom to not worry as much about money.  As the saying goes, “There’s nothing like having money in the bank.”

     What about you?  What would you do with an extra $100,000?  Add your comments below!

Photo by: purpleslog