Wisest way to use $15,000?

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tallgrl230
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Wisest way to use $15,000?

Post by tallgrl230 » Mon Jan 13, 2020 3:01 am

Say you ended up in the positive $15,000 cash at the end of the year. All your taxes are paid, loans & other debt is paid or minimal. You're just getting by financially and covering life's expenses with the income you have. Here's the catch: you have NO retirement other than social security, no investments besides the home you live in and you have an emergency fund of $5,000 (besides the $15,000.

Do you leave it in the bank for emergencies, invest is something you can cash upon emergency, invest in something long term?

I'm 46, a single mom and have no experience with investing or planning for "what if". In my divorce I lost my husband's retirement (I kept the home & equity for the kids' schools). He dissipated all the investments prior to divorce. So I'm starting out planning for my future at 46.

z3r0c00l
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Re: Wisest way to use $15,000?

Post by z3r0c00l » Mon Jan 13, 2020 7:36 am

Sorry to hear that you have are having to start over unexpectedly but I bet you are worthy of the challenge! At this stage I would suggest saving the money in an online bank account or short term CD. Something like that will earn interest but not lock the money up. The priority now as always will be to earn and save money, investing is a secondary concern. You should have a solid 20 years of career time ahead which means a chance to get your social security and savings boosted by working and saving. I know children mean the world, but you shouldn't neglect your own future too.

Flyer24
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Re: Wisest way to use $15,000?

Post by Flyer24 » Mon Jan 13, 2020 7:57 am

An off-topic post has been removed. Please stick with the OP question.

HomeStretch
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Re: Wisest way to use $15,000?

Post by HomeStretch » Mon Jan 13, 2020 8:03 am

Agree with placing the $15k in a liquid safe vehicle like a high yield savings accounts or a no-penalty CD. Ally is a well-regarded online bank that offers no-penalty CDs (there may be other banks too).

aristotelian
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Re: Wisest way to use $15,000?

Post by aristotelian » Mon Jan 13, 2020 8:04 am

I would start a Roth IRA with 12K (6000 for 2019 and 6000 for 2020). Use the remaining cash to increase ypur emergency fund. Within the Roth, invest at least half in a bond fund. You can use the Roth as a backup emergency fund since contributions can be withdrawn at any time with no penalty.

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Wiggums
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Re: Wisest way to use $15,000?

Post by Wiggums » Mon Jan 13, 2020 8:19 am

Definitely put the $15k in a high yield account. Luckily, time is on your side where you will get pay increases and earn more social security credits.

Good luck to you...

Dottie57
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Re: Wisest way to use $15,000?

Post by Dottie57 » Mon Jan 13, 2020 8:25 am

Does your workplace have a 401k? If so, can you start contributing? It is good to get setup to do so.

lessismore22
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Re: Wisest way to use $15,000?

Post by lessismore22 » Mon Jan 13, 2020 2:04 pm

You can fund a Roth with $12,000 of it($6,000 for 2019, $6,000 for 2020). This allows you to still access the money if you absolutely need it, while also investing for the long term. Use the Vanguard Target Retirement 2040 fund until you're comfortable picking your own asset allocation.

jeremyi
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Re: Wisest way to use $15,000?

Post by jeremyi » Mon Jan 13, 2020 2:19 pm

Another vote for funding the Roth. Invest it conservatively for now and you can access it if you need to supplement the emergency fund.

We did this for several years with a portion of our emergency fund, as the alternative was to simply lose that Roth space.

terran
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Re: Wisest way to use $15,000?

Post by terran » Mon Jan 13, 2020 2:36 pm

I guess I agree with both those suggesting to keep it in a liquid safe investment to bulk up your emergency fund and those suggesting you contribute to a Roth IRA. Consider: https://www.bogleheads.org/wiki/Roth_IR ... gency_fund

Note that you can only contribute to Roth to the extent that you have earned income (ie from work) that is at least as much as the contribution in the year for which you want to contribute.

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geerhardusvos
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Re: Wisest way to use $15,000?

Post by geerhardusvos » Mon Jan 13, 2020 2:41 pm

I agree with the advice here about emergency fund in high yield savings, and I’m sorry about your current situation. But there is a lot of hope. You have time, probably 20+ years, where you can accumulate wealth to prepare for retirement. Consider browsing this blog and the resources to build a Investment plan that you can write down and stick to you in the coming years. Even if you are able to save 10% of your take-home pay each month, you will be surprised how much better off you will be come Social Security age. Live below your means, try to increase your income, stay out of debt, invest the rest, and you got this!
VTSAX and chill

Financologist
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Re: Wisest way to use $15,000?

Post by Financologist » Mon Jan 13, 2020 3:50 pm

As a single mom reliant on a single income your safety net in the form of a solid emergency fund is essential. You should go to sleep every night knowing that a bump in the road won't put you in a tailspin. I would suggest keeping those funds in a high-yielding money market account. Capital One 360 and others are currently offering in the 2% range. As you get your bearings in your new station in life you can determine
an appropriate amount to invest from every paycheck (love Roth IRA and 401k) but holding these funds for now in a liquid interest-bearing account while you adapt to your new situation puts you in a position of strength. On a personal note, when my parents got divorced my mother was in her late forties. The divorce left her with very little. Fast forward 30 years and Mom is doing wonderfully. She was a teacher and and was able to carve out a comfortable retirement for herself by investing little by little but consistently after the divorce. I wish you all the best and..

Good luck

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tallgrl230
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Re: Wisest way to use $15,000?

Post by tallgrl230 » Mon Jan 13, 2020 3:51 pm

terran wrote:
Mon Jan 13, 2020 2:36 pm
I guess I agree with both those suggesting to keep it in a liquid safe investment to bulk up your emergency fund and those suggesting you contribute to a Roth IRA. Consider: https://www.bogleheads.org/wiki/Roth_IR ... gency_fund

Note that you can only contribute to Roth to the extent that you have earned income (ie from work) that is at least as much as the contribution in the year for which you want to contribute.
Well, I am a stay-at-home mom and just starting to look for work. I didn't earn anything through an employer last year. I did manage our rental property and sold it in 2019. I'd be using some of this money to invest in the ROTH IRA. Is that allowed? Id like the money to grow (obviously) but it was not earned through payroll. It's from selling the house.

terran
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Re: Wisest way to use $15,000?

Post by terran » Mon Jan 13, 2020 3:58 pm

tallgrl230 wrote:
Mon Jan 13, 2020 3:51 pm
terran wrote:
Mon Jan 13, 2020 2:36 pm
I guess I agree with both those suggesting to keep it in a liquid safe investment to bulk up your emergency fund and those suggesting you contribute to a Roth IRA. Consider: https://www.bogleheads.org/wiki/Roth_IR ... gency_fund

Note that you can only contribute to Roth to the extent that you have earned income (ie from work) that is at least as much as the contribution in the year for which you want to contribute.
Well, I am a stay-at-home mom and just starting to look for work. I didn't earn anything through an employer last year. I did manage our rental property and sold it in 2019. I'd be using some of this money to invest in the ROTH IRA. Is that allowed? Id like the money to grow (obviously) but it was not earned through payroll. It's from selling the house.
Probably not. If you get a W2 (from and employer) or file Schedule C (self employment income) you can contribute to an IRA, but Schedule E (for rental income) doesn't qualify.

mortfree
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Re: Wisest way to use $15,000?

Post by mortfree » Mon Jan 13, 2020 4:29 pm

Keep it simple.

Given your situation I would just keep 20k cash.

Forget about the Roth esp if no “W-2 earned income” in 2019.

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