Money2536

That helps.

She needs to sit down with a financial advisor to help her understand what she can afford.

SD_S2K

2007 Lexus SC 430 Base Styles
MSRP: $65,455


I understand blowing a little bit of the cash for fun and to help get over the loss of her family. But a $65k car is a baaaad idea. Not to mention the additional insurance cost for a female her age, the gas, the maintenance. Bad move. Tell her to get an IS350 at half the cost instead if she really wants a Lex.

Otherwise you need to help her perform due diligence and find the right financial adviser for her. Not some schmoe that will rip her in fees and make her nothing.

Buying a house at her age is not smart either. A girl, or any person, at that age is 98% of the time not ready to handle everything that comes with owning a house. All the additional costs and bills, front and rear yard, taxes, maintenance, etc. The girl is just entering the work force and will not have time to pay attention. She is probably better off spending half the dough on a real nice 2-3 bedroom townhouse/condo and renting out the other rooms to friends to generate more income and half low maintenance. Sock the other half of the cash away in Vanguard or other mutual funds for now.

whatever the case, good luck to her. one of those tough win/win situations that can become win/lose if you don't do it right the first time....

IRS2K

Seems I may be having a good influence with all of your good advice here!!

She's considering a Mazda Miata, Saturn Sky, or Honda S2000. She just wanted a convertible, thus the Lexus.

I've convinced her to look at a smaller "starter" condo. Ironically, the reason she doesn't want a condo is because of the appreciation, or lack of compared to a house. But she's looking around.

What's the main difference between a money manager and a financial adviser. What are some of the better companies?

There just may be hope left for her...

Thanks for all your help!!

Money2536

A money manager would typically be used by a financial advisor to purchase securities for a client. You can use a money management firm directly if you have enough money. She doesn't.

She would be best served going to one of the major wirehouses like Merrill Lynch, Smith Barney, UBS, Morgan Stanley and ask for the manager of the office. He/she would be able to take her as a client or give her to someone that he recommends. Since I work for Merrill, I'm a little biased toward them. Smith Barney would be my second choice. Ask for someone with a CFP, CFA, or ChFC designation. They would be more inclined to help her plan her future rather than sell her some stocks or loaded funds just to make money off of her.

The Gasman

Thank god she's listening to you. Tell her not to spend any of the 500 k if she doesn't need to. Invest it and it will be worth a lot more in the long run.

Mike in Atlanta

IF she knows that she will be in the same location for several years, I concur with the idea of purchasing a condo and investing the rest for the long haul; i.e., not tapping into it if at all possible. However, if she is not certain where she will be in 2 years, she is probably better off renting. An outright purchase of a condo would minimize living expenses making it very easy for her to live on her income. Explain to her that if she invests $250K now, and doesn't touch it for 15 years, it could feasibly grow to be in the neighborhood of $1 million. If she needs a car, she should purchase a modest one. Since her income will not warrant the depreciation of a new expensive car, she should look to pick up a nice used one. Many of the people I know who have amassed substantial wealth don't blow it on the bling. Wealth is not how much you earn, it is how much you save and grow.

Never assume that you will have appreciation in a home and be able to sell it at a gain in 2 years. Anyone suggesting this does not recall '90-'97. At least in SoCal, the market ran up in the late 80's like it had been doing recently. Then, in '90, the market dropped significantly and was very flat until '97. We just had another big run-up in values in some areas, and now those values are falling. Many economists believe it could be another period of several years before real estate begins appreciating again. Speculating in short-term gains in housing is like day trading; you better know the markets extremely well, or you will take it in the shorts.

SD_S2K

good follow up notes to my suggestions M in Atl, I agree with you

to the OP: do we have an update on what she has done thus far?

IRS2K

UPDATE:

She purchased a hardtop Miata- $25k. Currently looking at a home/condo in the $125-150k range. Seems like the housing market is down. Realtor says lots of price reduction and "deals" off of asking price.

She's also looking at several franchise opportunities. Subway, Cold Stone, and a UPS store are her favorites thus far. She's leaning towards a franchise rather than investments. She says she's still young and would prefer to be more proactive with her money.

She ended up taking a job for $30k/yr. Her lease ends on the 30th. She's going to sublease until she finds a house. I believe she's heading in the right direction.

Comments??

SD_S2K

Could have gotten a lot more for her $25k in my opinion but I think you said she wanted a convertible. Could have gotten a lightly used S2k for that amount. Oh well. At least she wasn't stupid and didn't blow on a $60k lexus.

The home/condo idea at that price range is perfect. Still think she is 110% better to buy a condo than a house. At her age she has no idea how to take care of a house and all that goes along with it in terms of maintenance and bills.

The franchise idea - bad unless she does A LOT of market research. Many of those places are not hugely profitable when you only own one. I read something about Subway or Submarina that said you can make $50-80k profit, and that is when the owner is working every day. You can really only make a lot on those places when you own several - such as 3-5 or more in an area. Again, she would have no chance of being successful if she is going to work a regular day job and try to own this on the side. No way Jose. Tell her to get a subscription to INC and Entrepreneur magazine and read up. Not easy owning a franchise.

She is better off earning 10% hassle free in index funds or something suggested by a financial adviser. She needs to approach the money as something she can stow away and forget about for 30 years that will turn into $1milllion+ sitting in the bank. Not something she can try to toy with and blow on a franchise or whatever.

my opinion...

ekal42o

agreed... with such a large amount of money, 5% interest is a substantial sum of cash that would make the money work. i personally wouldnt mind 25000 without any effort... concerning index funds, that only works with a bull economy, and i feel ours might be running outta gas... i would get into a high yield bond or CD... that money shouldn't be needed... 400,000 straight to a 5% bond, 75k left for disposable income if really needed...

just remember 5% isnt much on a 10,000 account... but adding another 0 adds a 0 to the interest income. and accounts are 100% safe. just remember fdic only insures i think accounts of 125000 or less