Inheritance Assignment

This assignment is supposed to be fun and culminates in what you have learned over the semester. In this assignment, you have inherited $200,000. You must spend or earmark all of this money. How will you spend it? I will give you some parameters, but you are free to spend it in whatever direction you want. The goal is the highest and best use of the money. It should also set you up for your future.

10% - Wants: You can spend up to 10% on whatever you want. You can also spend less than 10% if whatever you want doesnt cost that much.

10% - Needs: If you need a new car because your current car is falling apart, what will you buy, and how much does it cost? Do you need a new laptop? What kind and what does it cost?

80% - Investment: you must invest the rest. What will you invest into? What is your plan for wealth? Will you invest in real estate, stocks, bonds, cryptocurrency, starting your own business, etc. How much will you invest in each? Be specific. What can you afford to invest into?

Higher points will be awarded to plans that are more well thought out. Someone deciding to put the remaining amount all in real estate will not score as well because there is no plan. Versus someone who puts their remaining amount of money into real estate and lays out a plan. For example, what price house can you buy using the remaining amount of money as a deposit? What is the intention of this piece of real estate? Where can you buy, California, out of state? Is this realistic given current real estate prices? What is the interest rate and terms of the loan? Can you afford the payments?

The same pattern can be laid out for other investments - stocks, bonds, and cryptocurrency. What will you buy? How much will you spend on each investment? What is the current price? When do you plan on selling? Is there a time frame or a target price when you intend on selling? I recommend diversifying as to pick up any gains in one sector and minimize any losses in other sectors. What is your plan for diversification? What percentages will you use to invest in each sector? Why these percentages?

Generally speaking, the younger you are, the more you can invest in riskier, but higher returns, stocks, and cryptocurrencies. This allows you to recover from any dips in the asset class. Conversely, if you are older, then investing in more stable, but lower-return investments - bonds, mutual funds, etc.- is the general rule of thumb. Due to age, you have less time to recover if the market goes south.

I would like you to also consider your risk tolerance. Some people have a low-risk tolerance, so maybe you invest less in riskier assets - dividend stocks, mutual funds, municipal and regular bonds. Others have a higher tolerance for risk and so they will invest in higher risk, higher rewards assets - regular stocks, cryptocurrency, businesses, etc.

If some of the money will be used on starting a business, what kind of business is it? Why this business? How much do you plan on earmarking for the business before calling it quits if the business fails? What does the competition look like for the business and what makes you special enough to stand out and survive?

For the remaining investment amount, you can also take a combination of everything above - real estate, opening a business, stocks, bonds, and cryptocurrency. You can also adjust the wants and needs section to help fund the investment side of things. If you decide that your investment fund is too small for what you need, then shrink your wants and needs section to fund it. Instead of $20,000 for wants, maybe take $2,000. That would give your investment fund an $18,000 boost! Or in your needs section, can you buy used instead of new? That could also give you a few thousand extra to fund your investment portfolio.

What is your investment portfolio strategy?

Info:

Financial Plan for a $200,000 Inheritance

1. Put money in a high-yield savings account

2. Retirement

3. Emergencies

4. Pay off debt

5. Purchase a home

6. College Fund (x2)

7. Investments

8. Set money aside for kids (x2)

9. Wants

(Age: Mid 30's planning to retire at the age of sixty.)