Rich_by_the_Bay
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I always found Solin's books interesting. Click here for an example.
Do you handle lump sums differently?
- Thread starter SecondCor521
- Start date
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SecondCor521
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
In my case it happens to be a work-related variable pay bonus. I wasn't really expecting it at all.
I did find out that it will probably be a little bit less than I originally stated above; probably about 8% or so, but that is still effectively a month's salary, gross.
I wouldn't use it to increase my lifestyle at all. Mainly there were a few minor house and car repairs that are wants but not needs that came to mind. I might also go out to eat or something.
As far as the majority of the rest of it, I would probably apply it to my goals in order as most here have said. I already have life insurance, an emergency fund, adequate life insurance, am on track to be FI in a few years, and have the kids' college funds in place. At this point technically my next goal is paying down my modest student loan, although at a 3.5% fixed rate with a really low payment, I'm finding that a little hard. The other options are increasing my emergency fund further (already at 5 months), dumping it into the kids' college funds (already funded through October 2022), or dumping it into the taxable account.
I appreciate all the comments. I am a little surprised that most here handle them in fundamentally the same way.
2Cor521
I did find out that it will probably be a little bit less than I originally stated above; probably about 8% or so, but that is still effectively a month's salary, gross.
I wouldn't use it to increase my lifestyle at all. Mainly there were a few minor house and car repairs that are wants but not needs that came to mind. I might also go out to eat or something.
As far as the majority of the rest of it, I would probably apply it to my goals in order as most here have said. I already have life insurance, an emergency fund, adequate life insurance, am on track to be FI in a few years, and have the kids' college funds in place. At this point technically my next goal is paying down my modest student loan, although at a 3.5% fixed rate with a really low payment, I'm finding that a little hard. The other options are increasing my emergency fund further (already at 5 months), dumping it into the kids' college funds (already funded through October 2022), or dumping it into the taxable account.
I appreciate all the comments. I am a little surprised that most here handle them in fundamentally the same way.
2Cor521
OP
OP
SecondCor521
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Followup
Followup for anyone who might care:
About 1/3 went to taxes. This probably means I will see about 15% of the total back in the form of a tax refund next April.
20% went to 401(k) contributions.
I spent $5.50 at the work cafeteria to celebrate.
I paid off the balance on my credit card ($21.45).
The rest went towards my student loan, which knocked multiple years off the end of the payment plan.
Coincidentally I also got a modest raise, which moved my FI date up by a months or two.
2Cor521
Followup for anyone who might care:
About 1/3 went to taxes. This probably means I will see about 15% of the total back in the form of a tax refund next April.
20% went to 401(k) contributions.
I spent $5.50 at the work cafeteria to celebrate.
I paid off the balance on my credit card ($21.45).
The rest went towards my student loan, which knocked multiple years off the end of the payment plan.
Coincidentally I also got a modest raise, which moved my FI date up by a months or two.
2Cor521
The only lump sum I normally have to deal with is the annual bonus of which there was none in 2008 and 2009, and I'm now retired. I've never counted on a bonus and always put it into the retirement funds into the target AA.
This is our first year of retirement and we are about to receive our 3rd unexpected 5 figure lump sum.
1. My megacorp decided to reward it's employees for 2 years of frozen wages and lack of bonuses with it's biggest bonus pay-out ever, including retirees that had worked for the whole of 2009.
2. We completed the sale of my Dad's house after he died in December and split the estate between the 4 children.
3. FIL died in June and his house has now been sold and his estate settled and split between the 4 children.
The bonus went into the savings into the target AA but the 2 inheritances are in the UK so we haven't fully decided what to do with the monies yet. We spent some of it over the summer with our 10 weeks in England and since we plan to spend about 6 months in England / Europe next year we'll leave a big chunk of it in place for those expenses.
Interest rates are very low in the UK at present, particularly for non-residents (all the higher rates including Bank of Baroda have UK residency as a requirement). I looked at the possibility of putting some into UK mutual funds but their rates are MUCH higher than the USA plus there are hidden fees as well as the stated fees.
£7billion a year skimmed off our savings - Telegraph
If exchange rates improve greatly in our favor then I'll see about transfering a chunk of the loot over before next year otherwise I'll leave it where it is in our UK bank earning about 0.9%.
This is our first year of retirement and we are about to receive our 3rd unexpected 5 figure lump sum.
1. My megacorp decided to reward it's employees for 2 years of frozen wages and lack of bonuses with it's biggest bonus pay-out ever, including retirees that had worked for the whole of 2009.
2. We completed the sale of my Dad's house after he died in December and split the estate between the 4 children.
3. FIL died in June and his house has now been sold and his estate settled and split between the 4 children.
The bonus went into the savings into the target AA but the 2 inheritances are in the UK so we haven't fully decided what to do with the monies yet. We spent some of it over the summer with our 10 weeks in England and since we plan to spend about 6 months in England / Europe next year we'll leave a big chunk of it in place for those expenses.
Interest rates are very low in the UK at present, particularly for non-residents (all the higher rates including Bank of Baroda have UK residency as a requirement). I looked at the possibility of putting some into UK mutual funds but their rates are MUCH higher than the USA plus there are hidden fees as well as the stated fees.
£7billion a year skimmed off our savings - Telegraph
If exchange rates improve greatly in our favor then I'll see about transfering a chunk of the loot over before next year otherwise I'll leave it where it is in our UK bank earning about 0.9%.
bbbamI
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
You darlin'....are out of control.
Stocks are up 7-12% (12% for Small Cap Value, 7% for broad market)
Bonds are up 8-14% depending on your holdings.
Unless you are sitting on a boatload of cash or energy stocks, you should have been able to get 3.6% this year easily, even with a 25/75 allocation.
Midpack
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I've done exactly the same, except my numbers are 15% funny money and 85% toward retirement savings.
obgyn65
Thinks s/he gets paid by the post
Hello Koolau - Well I have been buying CDs for the last few years until a few weeks ago (expiration dates up to 2020). I also have municipal bonds, up to year 2030 but my statements say "callable" before (not what that means, sorry !). Not sure either of my bonds tax status... I do not owe equities (i.e. shares) because I am financially illiterate, very little time to handle banks paperwork and very risk averse. I can confirm my overall my average return is 3.6%. I would like to explore annuities further but some participants on this website have advised against them, so I feel stuck... any advice is welcome.
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