What would you do with $200,000?

[ZAMIRZ]

My friend who's my age, 19, recently inherited $200K from a great uncle he never knew existed that passed away. So far he's "spent" about $20,000 on a vacation, new computer, paying his parents back for stuff he owed them and other miscellaneous stuff. What do you suggest he do with it? Reason I ask is because at the rate he's spending it, the money's gonna be gone in a year, maybe two if he's lucky. Some suggestions I've made to him are to buy a condo and rent it out, down-payment on a house, dump $100K into a roth IRA or mutual fund. Since I know you guys are fairly older (and probably wiser) than us younguns I figured I'd ask and see what you suggest.

regards,

amir

[VaSteve]

Real estate is probably one of the better ways to go. Buy a small place in a hot area. Live there (or not) and take the tax deduction. The key word is discipline. It seems like you have more than him, since you asked.

They say that people who win millions in the lotter usually blow it all in a couple of years. I saw thid redneck from WV or somewhere who won millions on the Today show many months back.

He moved to Florida and "discovered" all these interests he never knew he had. Like swords (he had a ****load of them) and man jewelry (he had a ****load of that). It was pretty sad too. His place cleared screamed I just got a bunch of money and don't know what the hell to do with it.

Your friend has enjoyed some. That's good. Now tell him to make some smart choices, and give some to you for starters (for being concerned )

[on-ramp]

tell him to buy an early car (1965-1973 911). I hear the're good investments.

[pwd72s]

Does he have a job? If so, first thing I'd suggest is that he open a good ROTH IRA...but this is probably useless advice. And there is a max amount you are allowed to put in each year, I could be wrong, but I think it's $3K...then there is the choice of which investment vehicle to place this IRA in. But, like I said, 19 years old? 180K still left? The money sharks are circling as I type. He's dead meat...one thin prayer of hope is that he take a community college course on money management, but even those are only as good as whoever teaches it, and that's usually a retired banker...On the other hand, he could spend it on booze, a fast car, drugs, and fast women. If anything's left after that, he could just blow it...

[SilverPoly]

How about that RUF Yellowbird in Norway!

Just kidding..

VaSteve's got the right idea on Real Estate.
Maybe even a money market account.

I wonder what his parent's think about his recent inheritance.

Anyways good looking out for your friend.. most kids 19 would go nuts and be broke by the end of the month.

[SilverPoly]

Great idea on the Roth IRA..

forgot that retirement comes faster than a souped up 911..

Then you wouldn't have to stress about getting in fights w/ people in buffet lines at your retirement home.

[VaSteve]

Originally posted by on-ramp
tell him to buy an early car (1965-1973 911). I hear the're good investments.

As much as I like cars (Porsches especially) I would never buy one as an "investment." Unless you get something super rare and can preserve it for ever it's not worth it. Then you have to find someone who will buy it. An investment is only good if there is a "market" for the good when you plan to sell it. (Which incidentally includes real estate). Which is why I said a small place in a hot area as opposed to an MC Hammer-like compound all customized to the nines. Only one person wants something like that. Any other buyer can get it for fire-sale prices and then spend more $ undoing it.

[RANDY P]

buy a house, and never worry about debt again...

rjp

[DC_Targa]

Tell him to buy a new GT3 and give it to me as a retirement gift. OK, my second suggestion is to follow the advice posted earlier regarding investing it in real estate. I never was handed such a sum of money but simply bought a house, then a second one 20 years later and they are now my "safe haven" which will allow me to retire in April at 55.

[jrdavid68]

The Govinator will have some bonds for sale soon....

[DC_Targa]

Thanks for the great news. Glad we finally have a govenor that is not one of those spend and spend and then tax us make up for the stupidity type of professional polititions.

A state economy should be run like any other business. And Arny's history has demonstrated he is a good business man.

If I were king for a day I would dump ALL the career politicians onto a desert island and let them screw it up as they did my state's economy and leave those who really care to fix things up.

If our governator does as well as I think he will, I'd be pleased to toss him my vote next time he runs. If he doesn't, I'll vote for the next NON-career politician that has good business sense.

Since Arny can't run for President, and the current crop all seems to be professional jerks, I guess I keep hoping Bill Gates will run for president before long. I'll bet just the leverage that would create would bolster the economy to new heights. And if he screwed something up, he could just donate the money to pay for the mistake. He could probably even add some backdoor code to Windows that would automatically forward all terrorist-type communication straight to the FBI and CIA.

I recall we once had a previous actor as governor. He eventually became president. Seems he led us into an era I never imagined I would see in my lifetime. The Berlin wall was torn down. He somehow leveraged the USSR into giving up weapons programs that existed for fear we would build one that was still vaporware (aka "Star Wars"). What ended the fear of communism and nuclear war that was rampant during my childhood? It was something much more down to earth. It can be summed up in a single word. ECONOMICS.

Perhaps I have seemed to stray a bit off of the $200K thread. But then again, fiscal responsibility works both at home and for government...

[ZAMIRZ]

Thanks for the suggestions guys. pwd, there's a $2,000/year cap on putting money in an IRA. Oh yeah, and about the blowing it on booze and weed, well lets just say he's being very generous when we go out to clubs and stuff. BTW, he used to have a job and quit when he got the inheritance, he used to make custom license plate frames at the valley indoor swap meet (and l.a. auto show in the aftermarket hall)

Brian, that's an excellent idea and I'll suggest it to him.

He currently lives in a very nice 150 sq. ft. studio with a giant vaulted ceiling that's built in the backyard of his parents place. We go to junior college together, although he's dropped out once before and doesn't know WTF he wants to do with his life. I value him as a friend and don't want to see him blow this money, which is the main reason I posted here.

[DonDavis]

I think Cali has a real estate value correction coming. Be careful on what type of house he buys. Invest for retirement and stay out of debt. The ROTH has a 3k limit per year and I would have to speak to a professional on the rest. Actually, I would contact Dave Ramsey and follow his advice. www.daveramsey.com

If he plays it right, he's going to be VERY wealthy and leave a legacy for his grandkids.

[911Rob]

Hmmm, glad you asked, not many do? Hah ha ha.
Seriously, $180K is not alot of money today, but for a 19 yr. old its a good sum.

Tell him to invest it in his future.....

Go and interview all the successful business people you know and find out what career and 'lifestyle' you'd like to have. Make a serious investment in researching actual people, who have the successful things in life you would one day hope for.

Once you've determined what career path you'd like to follow, go out and get the education; the very best education for that field of work. Enjoy your time at college/univ., but keep your focus on the goals..... being the best at what you do and making lots of dough!

After your education, go into the career with the best companies; offer your services for high management positions with low pay, just for experience and abilities to prove what you know. Work for 3 or 4 firms of different sizes and learn all the management you can. Offer to do everything and anything.

Once you've got the education, experience and perhaps (not likely) some money left.... go start your own business and be your own boss! Your friend will enjoy the lifestyle that only 1/10th of 1% enjoy.

A good book is "Rich Man, Poor Man" and then all the sequels which really get into details of investments, business and success.

Real estate is a good investment, that's for sure; but $180K won't get you far. Use part of the money to buy accomodation so you're not renting, but getting a good education in a good field will be your best choice, if you have the money, time and smarts.

whew!, that was fun.

[tabs]

I was going to suggest the Rental Units idea. Or buy a commerical building...But He needs to do in in a booming market like LV. If he doesn't have the responsibility to take care of the buildings, then pick some Mutual Funds...The idea is to keep the money as no touchy....another idea is to put the money in Bond Mutual funds that gives him an income stream, that he can use. Oh well Z you a throwing him a life preserver, it's up to him to grab it.

[Larry Harris]

He needs to get the stress of the money off his shoulders. Date my ex wife.... I guarantee the money will be totally gone in 6 weeks.

[osidak]

Originally posted by ZAMIRZ
He currently lives in a very nice 150 sq. ft. studio

I have a tent I use to camp that is 144 sq. ft

My first (and only apartment) was 740 sq ft and I thought that was hole. Wow.

[id10t]

Buy a home, setup some small funds for long term retirement, and pay for a college education. Depending on where he lives, this may be possible for that amount, maybe not. Certainly do-able here in N. Florida...

[RickM]

Amir, it's cool to see you looking out for a friend. I also go for the Real Estate investment idea.

But step one, numero uno is......get the money out of his checking account. The less liquid it is the better.

[turbo6bar]

I'm not sure if this cat has the patience for real estate. I do like the idea of the fourplex. Do they even exist in CA?

I would use the money as down payments on single family rental properties. The properties I buy generate roughly 20-30% cash-on-cash return, but I do all the maintenance and management. 20% of $180k = $36k/yr income. It is not spectacular, but it's not a bad return. An entry level civil engineer in my area starts at $28-34k/yr, so it's not bad. Get a decent job to fill in the slow times and buy a new property every year. In 10 yrs, you sell off undesireable properties until you have 10 properties left. By this time, you have likely paid off most of the properties. Retire. This plan is not fancy. You won't impress chicks, but it sure as heck beats working for the man for 40 years. I do not miss the 20 mile commute in rush hour traffic.

Your friend has open doors many can only dream of having. However, your friend has age against him. How many of us exibited such maturity at that age? I sincerely wish him the best of luck.

Just a boring guy in Tennessee,
Jürgen