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What Would You Do With $10,000?

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After all those lottery questions, this one probably made you think that I won the lottery and $10,000 huh? Well, no, this question was prompted by a question to Gerri and is the focus of her Gerri’s Top Tips column for this week. The question itself is:

I am a 26-year-old professional. My parents just generously gave me $10,000. I want to use this money to begin saving for my retirement. I will contribute $4,000 to my Roth IRA. Any advice on what to do with the remaining $6,000?

Gerri recommends:

  • Consider a stock fund from one of the big brokerages, T Rowe, Vanguard, Fidelity, etc.
  • Emergency fund if you don’t have one

Yeah yeah, that’s pretty vanilla answers… and honestly they’re not that much fun. What would I do with $10,000?

  • Put a down-payment on a sweet new ride (okay, so it’s sweet only because it’s easy on gas and it’s green), or,
  • Two person 12-night Mediterranean-Eastern (Civitavecchia to Venice) cruise from Crystal Cruises ($5860 per person for an Oceanview room), or,
  • $10,000 in quarters so I can put it in a big vault and dive into it Scrooge McDuck style, or,
  • a ridiculous vacation to Hawaii or somewhere really warm and sunny and nowhere near here, or,
  • put it on red, or,
  • enter the World Series of Poker.

Any of those ideas sound a lot more fun than a stock fund or an emergency fund… what would you do? (I mean fun things, not the boring/responsible stuff you tell your parents)

{ 18 comments, please add your thoughts now! }

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18 Responses to “What Would You Do With $10,000?”

  1. Dustin says:

    The Market is doing well right now (you might say it is going crazy). I would tap into that for the next six to 24 months. Then you can deal with the question of what to do with $12000 instead.

  2. MoneyNing says:

    Buy some low cost funds and research on how you can better allocate your money to invest for the future.

  3. frugal mama says:

    1. Top off the Roth for the year (about 1,000)
    2. $2000 in each kids’ college funds ($4000)
    3. lump sum to auto loan ($3000)
    4. use some for fun i.e. vacation money ($2000)

    I think that while wanting to use the money to our best advantage, and put it to work for us, I also think it is important to spend some on fun and family time. For, much like an unsuccessful diet, cutting out all fun, like cutting out all french fries, can simply lead to a binge later. Also, kids are only young once, and family vacations (done within budget and reason) make memories that last forever. I see that as money well spent.

    ~fm

  4. saladdin says:

    1. Women
    2. Booze

  5. Mike K. says:

    Not much of a dilemma in my book. I wish that I would’ve had your awareness of the importance of saving for retirement at age 26. I also wish that I would’ve had parents capable of plunking down 10K to help cushion my ‘golden years.’

    Here’s my recommendation:

    1) Place $4000 into a ROTH IRA now (yesterday even!) ~ $4000 is the current contribution limit. Invest that $$$ into good growth stock mutual funds with a steady five to ten year track record of consistently high returns.

    2) Place $5000 into a ROTH IRA after January 1st ~ $5000 is the contribution limit for 2008. Invest that $$$ into good growth stock mutual funds with a steady five to ten year track record of consistently high returns.

    3) Place the remaining $1000 into a high interest bearing savings account like ING Direct or Salem Five Bank (I use ING Direct but Salem Five offers a slightly better return).

    The Results:

    Assuming that you started with $0 in your newly crerated ROTH IRA account, the $4000 that you contributed for 2007 plus the $5000 that you will contribute for 2008 will grow to $173,588 by age 65 (calculating on a conservative 8% rate of return) even if you never contribute another dime to the account……….ever.
    You don’t need my meager math skills to understand that you could be sitting on a huge pile of cash, at retirement, if you continue to MAX-OUT that ROTH IRA from here on out. I stress ROTH IRA because at your age it would be to your benefit to use the ROTH IRA and pull out your earnings TAX FREE at retirement. Wow!

    The $1000 that you placed into the high yield savings account will at least help to buffer that cash against the cost of inflation as well as provide you with an emergency cushion and prevent you from using credit cards in the event of an emergency. Your goal should be to save 3 to 6 months of expenses into this ‘Emergency Fund.’

    The take home message:
    Max out the IRA, save for a rainy day, COMPLETELY ban the plastic (credit cards) and ‘POOF’ ~ you’re a millionaire.

    Make the folks proud and use that $$$ wisely ~ don’t blow it! Time is on your side! Wishing you the best!

    Mike K.

    • binyam hailu says:

      great comment mike k. im also a 25 year old currently in the military, i have a house with 5% interest rate on 170.000 loan and a car with 8% interest rate im goin to iraq in 2 month and when i get back i should have atleast $20.000 and i was trying to figure out should i pay down the mortgage or car note.?

      thanx in advance

  6. Amanda says:

    If I had to pick something solely for enjoyment, I would definitely make it a totally indulgent internation vacation…

  7. Luke [also Zook] says:

    Ahhh….

    I wish I could land something like that for just being a nice guy, but I won’t be getting a sum like that. If I did, in my personal situation, I would take the $10,000 and because I have already placed $3500 into my Roth for the year, I would finish that baby out with $500.

    Then I would set aside $1500 for part of a vacation I would like to take overseas.

    With the $8,000 remaining, I would pay off $2500 in student loan debt and $2500 towards are car loan.

    With the remaining $3000, I would take car of a year’s condo fees which is $900.

    I would place $2000 into my brokerage account to grow somemore and then take the final $100 and go out to eat with the person/people who gave me this sum of money to thank them..

    Now back to reality….Darn.

  8. Patrick says:

    My wife and I chose the Mediterranean-Western cruise for our honeymoon… Barcelona, around the boot of Itlay, and returning to Barcelona – 11 days. We go in Sept. I’ll let you know how it is. ;)

    For her I would recommend maxing the Roth, establish emergency fund, pay debts. If there is anything left, I would start an index fund, and more importantly, keep contributing to that fund.

  9. Amber says:

    My totally fun not responsible way of spending $10k would be…

    Hmm.

    Probably Travel. Greece or Australia. Maybe a cruise. If it were a requirement to not spend it on getting out of debt that’s what I’d use it for.

  10. French fries… lots of french fries…

    A down-payment on a tank

  11. Vanessa Klinger says:

    If I had 10K I know exactly what I would do with it and all of the things that I had already done like my teeth (which require some major work) I would take a cruise to mexico, and submit my book to a publishig company. A dream I’ve had for 10 years. That’s what I would do with my 10K! .

    Cruise to Mexico
    Publish My Book

  12. steve says:

    - Buy a Submariner Rolex $4500 that is an investment and nice to wear and is useful

    - $5500 buy domain names (carefully choosen) and resell it later for profits.

    Me too I own $10 000 that is my fortune, I don’t have any other savings as I

    spend all my salary income on shopping, child school,……

    I think I will spend this way to make more money.

  13. Tim says:

    i’d buy 40,000 gumballs from the 25cent gumball machines.

    steve, BTW, a submariner is definitely not an investment. it doesn’t appreciate, although it will retain value better because of name recognition. you also have to take into account the $500-$700 maintenance cost every 2-3 years.

  14. Nashawn says:

    My situation is different. I have a $30,000 school loan. I am going to pay for first semester which is 12,000 next week. However. I have 18,000 sitting there in my account until the next payment which isnt till december. Is it unwise of me to try and open up a cd account and collect interest off of the loan? If I do it with my bank I will collect 4.15% interest each month, and no penalties for taking out from the account as much as I want after 5 days of having it.
    I want to make some money back…who knows maybe itll help pay off the loan.
    Although I am working towards getting scholarships…so it might be paid off before the end of 2008. (the loan)

    Any advice on making that money grow in the 4 months I have would be wise.

    • Tim says:

      Nashawn, a little confusing. if you are still in school, why aren’t the loan payments deferred? if you can get 4.15% each month (this seems very odd since that is nearly 50% APY), with no penalties, then I’d do it. However, it seems that it may be 4.15% APY not per month. 4.15% APY is worse than a high yield savings account like igobanking at 5.3% APY

      for only 4 months, i’d stick it in a high yield savings account.

  15. Abarajame says:

    $20 /lapdance gives you a total of 500*5 minutes = 2500 minutes of great joy and a very happy new girlfriend… that’s fun :D
    If you want to maximize it, wait for happy hours and you’ll end up with 5000 :)

  16. John Cooper says:

    I would repair my old car, buy some nice things for my wife, gave some to the Grand Kids, and do some much needed repairs on this old house.


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