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Optimal Finance Daily - Financial Independence and Money Advice
3310: [Part 2] Investing a Large Sum of Money: What to Do by Christina Browning of Our Rich Journey
00:09:28
Christina Browning highlights smart strategies for handling a financial windfall by focusing on financial literacy, setting long-term goals
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Oh, the car from Carvana's here. Well will you look at that. It's exactly what I ordered. Like precisely. It would be crazy if there were any catches. But there aren't, right?
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Right, because that's how car buying should be. With Carvana. You get the car you want, choose delivery or pickup and a week to love it or return it.
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Deliver your pickup Fees may apply. Limitations and exclusions may apply. See our 7 day return policy@carvana.com this.
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Is optimal Finance Daily Investing a Large Sum of Money what to Do, what not to do and how to Invest for Fire Part 2 by Christina Browning of rrichjourney.com what to do right now number one become financially literate. First things first, you must become financially literate. Read books, listen to podcasts, watch YouTube videos, take our stock market investing course. Do whatever you need to do to learn as much as you can about investing, finances and how to deal with your money. And do it now. You need to do this as soon as possible so that when the opportunity arises and you suddenly come into a large sum of money, you have the knowledge you need to make the best decisions for you. Set long term goals. If you have a goal that's far off in the distance, you have something ready in the wings for you to put that money towards. Just knowing what you want to put your money towards is powerful because it allows you to make well informed decisions with confidence beforehand so you can get your money working for you as soon as you get it. And number three, know whether to pay off debt or invest. When money comes into your life, you want to be able to know the best way to direct it. If you need help determining if your money would be better spent paying off your debt or investing that money, here's some things to consider. The amortization schedule on your debt, how much debt you have left, how much interest you're paying on your debt, and the different investment options you have available to you. Finally, if you decide to use a large sum of money to invest, here are three different options to how to invest large sums of money. 1. Investing in a Business Investing in a business is one of the best ways to turn money into even more money. Using this money to start a business and to invest in yourself is a great idea. But before you do, make sure you have a solid business plan. Don't just take all your money and throw it into a business that hasn't been tested because doing that is one way to lose it all. What you want to do is prove that your business actually works. And because this usually doesn't require too much money, you may only need to dedicate a portion of your lump sum towards testing. So to be clear, while investing all of your money into your business may be a great idea, you need to take it slow to minimize risk. You should first only put a bit of money towards ensuring the business has a solid business plan model and it's been tested. And then when you're more confident in it, you can use the rest of the money. In the future. Once your business starts to grow and flourish, another option available to you is to put the money towards supporting you while you transition from your regular job to to this full time business. Number two Investing in Real estate Aman and I love this option because we built a great portion of our wealth off of our real estate investments and we used a lump sum of $20,000 to get started. Using that money allowed us to buy the right property at the right time and grow our wealth significantly. Aman and I lived in and flipped houses, but there are many other real estate investment options out there as well as you can buy renovate and Airbnb mobile homes and RVs. You can buy a rental property and build a passive stream of income. You can purchase commercial real estate. There are so many opportunities in real estate if that's what you want to do. Investing in the Stock Market There are two different methods to investing in the stock market. Number one lump sum in which you make one large payment towards an investment or number two dollar cost averaging in which you make multiple smaller payments towards an investment over a longer period of time. So which should you do when you have a large amount of money sitting around. Well, according to a Vanguard study, people who took the lump sum approach actually saw better results than dollar cost averaging because of the greater amount of time the money spends in the market. That said, if you're risk averse and anticipate pulling money out of the market if it ever dips too low, then psychologically speaking, it might be better to use the dollar cost approach. In other words, whether you're better off lump sum investing a large amount of money or dollar cost averaging it into the market depends quite a bit on your own risk tolerance level and how you respond to fluctuations in the market. So assess your level of risk tolerance and decide the best strategy for you. So these are my thoughts on how to invest a large sum of money. Notice that none of these options involves any kind of get rich quick scheme. None of these three options are going to double your money overnight. The journey to financial independence takes time even with large sums of money, but every large lump sum of money is nevertheless an opportunity to move closer towards your fire goal. You just listened to part two of the post titled Investing a Large Sum of what to Do, what not to do and how to Invest for Fire by Christina Browning of rrichjourney.com.
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So you're about to make a trade based on a friend's text, but which u do you listen to is it we could buy a house in Tulum, get optioning those options. We could lose everything. Or let's do a little research, get your head in the trade and make the investment decision that's right for you. Learn more@finra.org TradeSmart.
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Tonight on NBC, Jimmy Fallon and Bozma St. John host the incredible new competition show. I hired 10 creatives from all walks of life. They will be battling it out to see who can impress the world's biggest brands.
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This is a huge opportunity.
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This is the battle for the next big idea.
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This is not Play play. We're spending millions of dollars.
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I'm so excited to embark on this adventure with all of you. May the best idea win on Brand with Jimmy Fallon tonight on NBC.
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Do you ever fantasize about a financial windfall and what you would do with that money? I can remember being a kid and daydreaming about all the luxuries I would buy if I won the lottery. My, how things have changed. I can say with almost complete certainty that I will never win the lottery because I don't play. And while lottery advertisers might tell you you can't win if you don't play. As a way to lure you into buying a ticket, I'd encourage you to not fall for it. If you took the $220 that the average American adult spends on lottery tickets each year and invested It Instead, after 30 years, presuming a 6% return, you'd have over $17,000. Anyone who wins $17,000 playing the lottery would be pretty thrilled, don't you think? So why not just do it yourself by relying on compound interest instead of luck? That being said, even if you don't play the lottery, many of us at some point in our lives might need to consider what to do if we get a windfall or an unexpected sum of money from an inheritance, legal settlement, etc. I think a good rule of thumb would be to treat any unexpected money that same as you would treat money you're expecting and use it to just speed up the timeline on your current financial goals. So for example, you could immediately pay off all your debts, set up your emergency fund, fully fund your retirement vehicles, and then use the rest to invest in a business, real estate, or simply throw it into an after tax brokerage. When you have a current financial plan with a clear order of operations, a windfall can simply expedite the plan. It will be tempting to spend the windfall on fun stuff and help your friends and family who ask. And all this is still possible. But I hope if this happens to me, I will opt to prioritize my current financial plan. And that's another episode of Optimal Finance Daily in the books. I'll be back with more posts for you tomorrow, so I'll see you there where your optimal life awaits.