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Upon the death of a relative, a trust was established in my name.  In 2 years I will gain control of 50% of the trust and gain control of the remainder 5 years after that.

In 2 years 50% will likely be worth between $225k-$250k.  At that time, my debt will consist of $55k in student loans and $85k remaining on my mortgage (4.1% rate).  My emergency fund will likely be $4k-$5k.  My gross household income is currently around $65k/year.  I get the full match on my 401k and contribute to a Roth IRA, although not the maximum amount yet.

My question is what are some suggestions as to how I should invest/continue investing the money?  I assume the standard answer would be to up my emergency fund, pay off the student loans and possibly the mortgage, and continue investing the rest as is; allocated across mutual/index funds based upon my age.

However, my goal is to get to a point where I eventually work for myself and to use this money to work towards this goal.  A few of the more standard ideas I have come up with are real estate, angel investing, business partnerships, etc.  While I do not claim to be an expert in any of these fields, I was thinking I could spend the next 2 years educating myself on some or all of these topics, so I can be ready to put my money to work when the time comes.

Thoughts?  Suggestions?  Thanks in advance.

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rated:
jasonconway said:   My question is what are some suggestions as to how I should invest/continue investing the money?  I assume the standard answer would be to up my emergency fund, pay off the student loans and possibly the mortgage, and continue investing the rest as is; allocated across mutual/index funds based upon my age.

However, my goal is to get to a point where I eventually work for myself and to use this money to work towards this goal.  A few of the more standard ideas I have come up with are real estate, angel investing, business partnerships, etc.  While I do not claim to be an expert in any of these fields, I was thinking I could spend the next 2 years educating myself on some or all of these topics, so I can be ready to put my money to work when the time comes.

Thoughts?  Suggestions?  Thanks in advance.

  
The standard answer you already provided is likely the best course of action. Business partnerships and angel investing would be a great way to lose all your money. I don't recommend investing in other people's non-publically traded businesses unless you have started your own successful business. Real estate could be OK depending on where you're investing and in what specifically you're investing (flips are going to be more risky than SFR rentals). If you're going to end up with 450-500k in total and you want to play with investing in business or whatever, set aside 50-100k and limit yourself to that.

Bottom line with any investing is figure out your risk tolerance, level of effort, and return. Annual returns of 5% are realistic for lower risk and lower effort. 5-10% is realistic for mid-risk and mid-effort. > 10% is possible, but the "too good to be true" alarm bells should probably be ringing unless you're taking on a decent amount of effort.

Sticking with boglehead and Dave Ramsey style investing and financial advice is probably the best for 99% of people out there.

rated:
As for the obvious stuff, you put it a little out of order. You definitely want to MAX your retirement (not continue as-is) BEFORE you consider paying off your mortgage.

Real estate, angel investing, and business partnerships aren't exactly "ideas," they are categories that "ideas" fall into. It all depends on how good the "ideas" are (which equates to your return on investment) whether you can live off those investments. Ask the people on this board with $500,000 in investments if they can stop working and I don't think very many of them will say they can. So you're going to need really good "ideas" if that's what you're hoping for. Sorry to burst your bubble.

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Angel investing is a way for people that are already rich to take their play money and gamble on getting richer. It's not a good way to build wealth (as vegas4x4 stated).

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I think more information would be helpful: how old you are, your expected income over the next few years, and your monthly expenses would be a good start.

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I am 28 yrs old, income should stay steady over the next few years ($65-$70k), and monthly expenses are somewhat high right now around $3k, however this number should drop once I pay off CC debt and car loans.  I did not expect or plan to quit my job as soon as I gained access to the fund, but instead am exploring investment options that will possibly allow me to become "self employed" sometime in the next 5 - 10 years.  Perhaps very early retirement would be a better phrase.  

rated:
$500k in 2-7 years will give you a lot of security, but I don't think it'll make retirement a safe option on its own.

I don't think I'd ever pay off your 4.1% mortgage, unless it's because you're getting a new cheaper or bigger one. And I understand that at that relatively small balance, refinancing to save money is not easy. And if that's a 30 year fixed rate, 4.1% is decent anyway. I'd give that same consideration for the student loans - what's the interest rate? What options will you have to get money at that cost elsewhere?

Otherwise I agree with the posts already here. Angel investing and business partnerships are high risk gambling. But if you study up on landlording and your local rental market, easing into that with some of the money could go well.

PS, if you account id here is your real name, I'd contact the mods and ask to modify it to some alias.

rated:
Thanks for the tips.  Landlording seems like the most viable option assuming I put in the necessary work to study up on the area markets as well as the process itself.  The student loan rate is 7.65%

rated:
7.65% is pretty high right now. I'd make paying that off a priority, and I'm usually a fan of borrowing money.

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The most important things to focus on are asset allocation, and minimizing/maintaining your standard of living.

There are two things that this money can do for you:
- Helps give you confidence in your career to take risks that will pay off. Not being afraid to demand a raise for fear of being laid off, and job hopping will help your earning power, especially if you don't have a family yet.
- Helps passive growth in index funds.

Other comments
Most would take a 7.65% guaranteed income investment in a heartbeat. Pay down those loans!

Real Estate is very labor intense, especially the rehab. If you MUST explore this field, ask your attorney about seller-financed "land contracts" in your state instead of leasing. By selling the home upfront, you don't have to worry about maintaining the water heater/furnace/toilets, and the buyer gets to pay rent-like amount, with the interest being tax deductible.

There are many, many, many scammers who want to use your money to play businessman. Many of them are disguised as business partners. Limit any investment to 5% of your net worth, and then only if you can afford a 100% loss.

rated:
sarrettblack said:   I am 28 yrs old, income should stay steady over the next few years ($65-$70k), and monthly expenses are somewhat high right now around $3k, however this number should drop once I pay off CC debt and car loans.  I did not expect or plan to quit my job as soon as I gained access to the fund, but instead am exploring investment options that will possibly allow me to become "self employed" sometime in the next 5 - 10 years.  Perhaps very early retirement would be a better phrase.  
  important info that should have been listed in your OP.
your debt is not " $55k in student loans and $85k remaining on my mortgage (4.1% rate) "
your debt is at least $55k in student loans and $85k remaining on my mortgage (4.1% rate) , CC debt (amount and interest?) and car loan (amount and interest?), and what else?
225k or 500k (total) seems like a lot, but at your age, it's not an amount of money that would allow you to retire. It's definitely a good start though.

If it were me, I would
1) refinance my mortgage, assuming your credit is good, you can beat 4.1%
2) after receiving trust part 1 I would do the following (listed highest priority on top)

  • pay off CC debt
  • pay off car loan
  • pay off student loan
  • max contributions to 401(k)
  • max contributions to Roth IRA
  • max HSA
  • max 529s
  • max iBonds
  • pay off mortgage

I'd ignore extra emergency fund, I'd use Roth IRA as emergency fund http://www.investopedia.com/articles/personal-finance/040714/how... 
Long term thinking - I'd figure out what I want to do with my life/money.
If/when you decide what you want to do with your life, get a HELOC and use equity to do whatever (i.e. buy a rental property).

 

rated:
So debt today is as follows:

CC:  $2050 - 17.99% - should have paid off in 6 months or less
Car1:  $5705 - 3.85% - was planning to use next tax return to pay remainder, so around Feb 2018
Car2:  $17k - 3.69 % APR - was planning to focus on paying this off after car1
Mortgage:  $93k - 4.00%* - purchased home in Mar 2017 for 93500 from in laws.  Was appraised at $120k
Student loans (actually my wifes):  $36k @ 7.65% & $30k @ lower rate (believe my wife said in the 4s)

Based upon my current plan I expect to have CC and both cars paid off when portion 1 of trust becomes available.  Probably should've included this info in the OP.   Let me know if this changes anything.

rated:
sarrettblack said:   So debt today is as follows:

CC:  $2050 - 17.99% - should have paid off in 6 months or less
Car1:  $5705 - 3.85% - was planning to use next tax return to pay remainder, so around Feb 2018
Car2:  $17k - 3.69 % APR - was planning to focus on paying this off after car1
Mortgage:  $93k - 4.00%* - purchased home in Mar 2017 for 93500 from in laws.  Was appraised at $120k
Student loans (actually my wifes):  $36k @ 7.65% & $30k @ lower rate (believe my wife said in the 4s)

Based upon my current plan I expect to have CC and both cars paid off when portion 1 of trust becomes available.  Probably should've included this info in the OP.   Let me know if this changes anything.

Details are helpful. Try to tackle as much of this debt now, so you will have a cleaner slate when the money comes in.

Figure out what you can do budget-wise to trim some expenses. This will net you more over a lifetime than the trust ever will.
Do whatever you can to pay off the CC now. Only pay minimums on everything else until that is gone. Never carry a non-0% balance on a CC again.
Adjust your withholdings so you don't have a tax refund next year, and instead use the extra amount in your paycheck to pay things down.
Get aggressive on the student loans once the CC is clear. I would pay them off as quickly as possible unless you seriously expect them to get forgiven (part of the for-profit college scams or due to wife's public service or employer). See if that loan can be refinanced.
 

rated:
sarrettblack said:   So debt today is as follows:

CC:  $2050 - 17.99% - should have paid off in 6 months or less
Car1:  $5705 - 3.85% - was planning to use next tax return to pay remainder, so around Feb 2018
Car2:  $17k - 3.69 % APR - was planning to focus on paying this off after car1
Mortgage:  $93k - 4.00%* - purchased home in Mar 2017 for 93500 from in laws.  Was appraised at $120k
Student loans (actually my wifes):  $36k @ 7.65% & $30k @ lower rate (believe my wife said in the 4s)

Based upon my current plan I expect to have CC and both cars paid off when portion 1 of trust becomes available.  Probably should've included this info in the OP.   Let me know if this changes anything.

Doesn't really change my advice. If you pay something off first, check it off the list. Except, I'd consider making minimum payments on cars and throw money at 7.65% student loan since it's more expensive debt.
Right now you have 65k gross income, and 183,755 debt (including 93k mortgage).
When trust part 1 hits, you'll have 65-75k gross income (pending raises), and if you pay off all debt, you'll have 40-65k leftover.
Do you need to pay taxes on the distributions from the trust? If so, in 2 years you'll basically have your income and be debt free with no extra cash.


 

rated:
Since you are married you need to take the extra step of making you you don't mix these funds with joint funds. Keep the money in seperate investment accounts.

Also do not pay of your mortgage with the funds. Depending on the strength of your marriage I would consider not paying off the student loans to. Depending on your state keeping these funds totally separate should shield them if you ever do get divorced.

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