Retire Before Dad

    • Start!
      • About
      • RBD Story
      • Featured on…
      • Archive
      • Portfolio
      • Guest Post Policy
      • Contact
      • Terms & Privacy Policy
      • Home
    • IPOs
    • Reviews
      • Sure Dividend Review
      • Yieldstreet Review
      • Fundrise Review
      • M1 Finance Review
      • Motley Fool Stock Advisor
      • Motley Fool Rule Breakers
      • AcreTrader Review
      • Masterworks Review
      • Roofstock Review
      • PeerStreet Review
      • EquityMultiple Review
      • Virginia 529 Review
    • Resources
      • Passive Income Ideas
      • Best Brokers for Dividends
      • Dividend Aristocrats
      • Debt-Free S&P 500 Stocks
      • Best Real Estate Crowdfunding Platforms
      • Affiliate Programs And Blogging
      • How To Start An Online Business
    • Recommended
      • Net Worth Calculator
      • Tools
      • Blogroll
      • Dads Blog Money
    • Best Cards
      • Travel Rewards
      • Cash Back
      • Small Business
      • Airline Rewards
      • Hotel Rewards
    Investing· Personal Finance· Real Estate· Stocks· Tax Advantaged

    10 Wise Investments for a Cash Windfall

    By Retire Before Dad

    This page may contain links to our partners. RBD may be compensated when a link is clicked. See the full disclosure here.

    If you expect to receive a stimulus payment, do you plan to spend, save or invest it? Here are some wise investment ideas to help you decide.

    The U.S. government is borrowing $1.9 trillion to provide pandemic relief and stimulate the economy. 

    A big chunk of that will be direct payments to Americans. I won’t get into the details of who gets what; you can find that here. 

    Long story short, many Americans will get more than a thousand dollars deposited to their bank accounts or mailed in the coming weeks.

    As of St. Patrick’s Day, the IRS sent out 90 million payments. 

    It’s the third stimulus payment since COVID-19 arrived on our shores.  

    According to a survey by Deutsche Bank, respondents plan to put 37% of their stimulus checks into stocks. If that holds true, it could amount to an inflow of $170 billion into the stock market. 

    Many individuals and families who will receive stimulus checks don’t need them. 

    So what should those people do when they receive a cash windfall? 

    Consider these questions before committing to spending, saving, or investing a cash windfall:

    • Do you have enough to cover living expenses for you and your immediate family?
    • Are you free of high-interest credit card debt? (If not, stop reading and pay down the debt). 
    • Do you have sufficient savings in the bank (3-6 months emergency/opportunity fund)?

    If you answered yes to all three, investing the money toward your future or well-being may be a wise investment. Here are ten ideas for when you receive a stimulus check or any cash windfall.

    Table of Contents

    • 1. Build Savings
    • 2. Buy Index Funds or ETFs
    • 3. Cover Refinance Closing Costs
    • 4. Invest in Real Estate
    • 5. Open an IRA
    • 6. Complete an Estate Plan
    • 7. Buy a Bike
    • 8. Book a Vacation
    • 9. Preemptively Replace Old Appliances
    • 10. Support Your Community

    1. Build Savings

    A penny saved is a penny earned. 

    With the exuberant stock market and the economy opening at a rapid pace, your first instinct may be to spend the money or toss it into an investment when it lands in your account. 

    Instead, it may be wiser to pause for now and act later with the money. 

    Take some time to contemplate your spending or investment choice. There’s no rush. Admire your bank account bulge for a few weeks.

    Put it into a high-yield savings account while you wait for the right opportunity. Even though savings rates are low right now, you’ll earn some interest while you wait. 

    When you’re ready to act, and you’re not sure what to do, spread the love. Spend some, save some, give some, and invest some. 

    2. Buy Index Funds or ETFs

    You, me, and the experts on TV don’t know where the market will be this year or next.

    But a decade from now, the stock market will likely be higher. Time and patience are your investing superpowers. 

    If you’re a long-term investor, now is as good a time as any to buy stock market index funds.

    Instead of buying the S&P 500, aim for a broader market U.S. index such as the Vanguard Total Stock Market Index Fund (symbol: VTI), giving you exposure to small and mid-caps too.

    Tesla, if you recall, was only added to the S&P 500 in December 2020, meaning the index missed out on its massive gains for a decade. 

    The Vanguard Total International Stock ETF (symbol: VXUS) is a similar international fund.

     


    Buying an index fund removes the whole stock analysis and selection process, so you can save your brainpower for earning active income. 

    If you intend to invest your stimulus check into the market, it’s better to invest the available lump sum right away rather than dollar cost average over time. Nick at Of Dollars and Data wrote an excellent article on lump sum vs. dollar-cost averaging, explaining the rationale. 

    Read more: Getting Started with Investing? Here’s What to Do

    3. Cover Refinance Closing Costs

    If you intend to stay in your home and have a mortgage rate of more than 4%, using stimulus to pay closing costs to refinance your mortgage can have a high rate of return. 

    Refinancing reduces your monthly payment, shortens (or extends) the loan payoff date, and saves you tens of thousands over the life of the loan.

    In some cases, the refinance can pay for itself in a year or less. 

    It’s a low-risk powerful financial maneuver.

    Here’s where rates are now, off the recent all-time lows. 

    For an end-to-end refinance experience, complete the entire origination process from rate comparison to closing on Credible *. Compare multiple lenders and loans. 

    4. Invest in Real Estate

    Real estate is a wise investment any time you can buy a property below market rates. That’s easier said than done, especially in a tight market. 

    Long-term rental properties are one of the top income-producing assets you can buy if you’re patient.

    Even after the crash of 2008-2009, prices eventually recovered.

    I sold my condo in 2019 for $20,000 above what I paid in 2006. 

    It was a wild ride for a few years when the value dropped $50,000 below the purchase price.

    But patience and eight years of rental income brought an ill-timed purchase back to the green. 

    With a 10-year investment horizon, a rental property near your home may be a good option if you live in a low cost of living area.

    These stimulus checks won’t cover a down payment on an investment property. But it’s a start. 

    For those living in expensive cities, services such as Roofstock help identify cash-flow positive turnkey rental properties, ideal for out-of-state investors.

    If you’re not looking to acquire a property, or you want to invest your stimulus sooner, you may look at traded REIT ETFs such as the Vanguard Real Estate Index Fund (symbol: VNQ) or non-traded REITs from crowdfunding platforms such as Fundrise. 

    Crowdfunded real estate has boomed in the past five years, giving you access to multi-family residential, commercial properties, and farmland investments.

    Investors with long-term investment horizons may find growth and income opportunities in these areas. 

    5. Open an IRA

    Tax-advantaged investment accounts help your investments grow larger than regular brokerage accounts. 

    Traditional IRAs lower your taxable income when you contribute, and the earnings grow tax-free until you start withdrawals. 

    Roth IRAs don’t reduce your taxes when you contribute, but the earnings also grow tax-free. There’s no taxation when you withdraw the money after age 59 1/2. 

    If you don’t have an IRA, using your stimulus to open one is a solid move.

    Use the money to invest in index funds or individual stocks if your investment horizon is longer than five years. Mix in some REITs, preferred stock funds, and bond funds (corporate or municipal) to build an income portfolio if you’re closer to retirement age. 

    IRA rules allow for a wide variety of investments. Open an account through an online broker to buy stocks, bonds, mutual funds, and ETFs. For alternative assets such as real estate, you can use a self-directed IRA. 

    There are income limitations for IRA contributions. However, if you receive a stimulus payment, you fall under the IRA modified adjusted gross income (MAGI) ceilings for 2021. 

    6. Complete an Estate Plan

    I know this doesn’t excite you, but an estate plan is an investment in the future — the part when you aren’t here anymore. 

    Setting up a comprehensive estate plan will ensure your assets are appropriately disbursed when you die.

    You’ll never reap the direct benefits of this investment, except knowing that you’ve responsibly unburdened your family from financial complications upon your passing. 

    Maybe this “free money” from the government can serve as a kick-starter to complete something long overdue.

    Expect to pay $1000-$2000 for a standard package (will, living trust, durable power of attorney, advance medical directive). Ask neighbors or friends to refer a local attorney who specializes.

    Online options are available from companies such as Gentreo that provides the same service for a recurring fee. 

    7. Buy a Bike

    This is not an endorsement to buy an exercise bike with a fancy screen and recurring monthly payment.  

    A real bike that gets you outside with the family, improves your health, and even replaces your car from time to time is an excellent investment. 

    I went to college at a large campus and rode my bike everywhere. When I moved into my own place later on, I stopped biking altogether because I didn’t have a good place to store it, and it rusted away. 

    But a few years ago, I spent about $600 on a bike from REI, and its benefits to me are far beyond what I paid (I have the Co-op CTY 1.1). 

    In the summer, I ride to the pool in the mornings to swim laps. We take family rides around the block nearly every day that it’s warm.

    My son and I explore our local area and go on epic rides (his words) into town for lunch.

    Exploring area neighborhoods filled the void of not being able to travel during the depths of the lockdown.

    It’s the best purchase I’ve made in the past five years.

    If you live somewhere that’s not conducive to cycling, consider another physical asset that makes your life better, preferably one that gets you outside, helps reconnect with friends, or improves your physical and mental health.

    8. Book a Vacation

    The pandemic is more than a year old now. Our family stayed home the whole time except for a one-week beach trip in August. 

    My paid time off balance is about to max out, so we’re finally planning to get away from home this spring. 

    Now that the vaccine is being distributed and flights are filling up, it’s time to start booking vacations again if you haven’t yet.

    As far as spending goes, travel provides some of the most memorable experiences of our lives. It resets our brains to perform better at work when we return.

    Vacations are definitely worth the cost. This time, let the government chip in. Make it two weeks if you can. 

    9. Preemptively Replace Old Appliances

    I’m all for extending the life of appliances as long as possible. You can usually choose to repair it rather than buy a new one.

    However, at some point, you know an appliance is too old and could crap out at any moment. Or, it’s old enough, and someone in the family has a vendetta against it (*ahem, Mrs. RBD and the dishwasher). 

    Replacing a dead appliance is a common use of emergency funds. However, people often turn to credit for replacements because they are ill-prepared. 

    There are benefits to preemptively replacing an older appliance: 

    • Replace it on your timeline instead of reacting to an outage. 
    • Spend time comparison shopping and act on discounts.
    • Compare installer prices.
    • Avoid appliance downtime. 

    The alternatives are to set aside cash in a savings account targeted for appliance purchases or pay for it from excess cash flow. 

    But if it’s going to need a replacement soon anyways, stimulus money does the job. 

    10. Support Your Community

    COVID-19 has wrecked families and communities.

    More than 2.5 million deaths are attributed to the virus worldwide. 

    Small businesses took a beating. 

    Local organizations that rely on donations or charitable events lost a year’s worth of fundraising.

    In my community, several of the organizations we’re involved with are struggling compared to previous years — preschool, PTA, sports, scouting, and more. 

    The extra money from the stimulus is a great opportunity to support local businesses, make donations to organizations you care about, and help others in need through charitable giving. 

    Other ideas for supporting in your community: 

    • Order take-out or delivery
    • Tip well
    • Hire out a home service (yard, cleaning)
    • Donate food and home supplies
    • Donate unused furniture or clutter that’s useful to others
    • Avoid big chains in favor of local stores
    • Give to your place of worship
    • Find a local farmer’s market

    COVID-19 and its economic impact have changed our communities. Supporting your community through conscious spending and charity helps accelerate the restoration.

    Photo via DepositPhotos used under license. The author is long TSLA.

     

    Please Share!

    • Click to share on Twitter (Opens in new window)
    • Click to share on Facebook (Opens in new window)
    • Click to share on Reddit (Opens in new window)
    • Click to share on Pinterest (Opens in new window)
    • Click to share on LinkedIn (Opens in new window)
    • Click to email this to a friend (Opens in new window)

    Favorite tools and investment services right now:

    Credible* - Now is an excellent time to refinance your mortgage and save. Credible makes it painless.

    Personal Capital - A free tool to track your net worth and analyze investments.

    M1 Finance - A top online broker for long-term investors and dividend reinvestment (review)

    Fundrise - The easiest way to invest in high-quality real estate with as little as $10 (review)

    *Advertising Disclosure: RBD partners with Credible which offers rate comparisons on many loan products, including mortgage refinances and student loans. This content is not provided by Credible or any of the Providers on the Credible website. Any opinions, analyses, reviews or recommendations expressed here are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by Credible. RBD is compensated for customer leads. Credible Operations, Inc., NMLS Number 1681276, not available in all states. 320 Blackwell Street, Suite 200 Durham, NC 27701.
    Retire Before Dad

    I’m a 45-year-old IT professional, investor, and blogger based in the Washington, DC metro area. My primary financial goal is to retire at age 55, one year before my Dad retired. I write about how to build income streams so you can explore the unusual. Read the whole story HERE.

    Filed Under: Investing, Personal Finance, Real Estate, Stocks, Tax Advantaged

    Comments

    1. Please note: Responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.
    2. Fritz @ The Retirement Manifesto says

      March 18, 2021 at 11:54 am

      But…but…but…BITCOIN!

      Haha. Nice overview of responsible ways to invest that stimululs. And, nice job leaving out the latest fad of crypto’s, NOT the place to invest unless you’ve got a surplus you’re willing to lose, IMHO.

      Reply
      • Retire Before Dad says

        March 18, 2021 at 12:38 pm

        Oh Fritz, you had to bring bitcoin into this! It seems like it won’t go away, so I can’t rule out digital coins and cryptography investments in the future. I can see why people are excited and anticipate massive opportunities, but I’m not excited yet, and therefore I will likely miss out on any gains or loses and I’m OK with that. Coinbase is the more interesting opportunity in my view (IPO coming soon), maybe because I understand stocks better than digital coins.

        Reply
    3. Kevin says

      March 21, 2021 at 9:23 am

      You have some really good items here for sure. One question though. I’ve been having trouble finding crowdfunding/investing vehicles (like Fundrise for example) for farmland that are open to non-accredited investors. Unfortunately us poorer folk get the shaft on many juicy investments. Any suggestions?

      Reply
      • Retire Before Dad says

        March 21, 2021 at 4:28 pm

        None that I know of other than AcreTrader and FarmTogether, and both are for accredited investors. There are a few farmland REITs that are traded you could research. FPI and LAND are the symbols.

        Reply
    4. Budget Life List says

      March 24, 2021 at 10:43 am

      Great insight! We recently refinanced and are pleased with our rate (2.25%). Using the stimulus for the closing costs was something I didn’t even think about!

      Reply
    5. Dividend Power says

      March 24, 2021 at 12:33 pm

      I think the priorities are emergency fund and then pay debt.

      Reply

    Comments Welcome! Cancel reply

    This site uses Akismet to reduce spam. Learn how your comment data is processed.

    Services I Use Every Day

    Personal Banking: Wells Fargo
    Travel Credit: Chase Sapphire Preferred
    Primary Savings: Marcus
    Primary Broker: Fidelity
    DRIP Broker: M1 Finance
    Biz Banking: Wells Fargo
    Biz Credit: Chase Ink Business Preferred
    Net Worth Calculator: Personal Capital

    Home
    About
    Featured on
    Resources
    Website Terms/Privacy Policy/Full Disclaimer

    ADVERTISING DISCLOSURE: This website engages in affiliate marketing. This means that if you use an affiliate link to make a purchase, the website will receive a commission on that purchase. All efforts are made to ensure that affiliate links are disclosed in accordance with the FTC. Retire Before Dad has partnered with Cardratings for our coverage of credit card products. Retire Before Dad and CardRatings may receive a commission from card issuers. The Website uses Mediavine to manage all third-party advertising on the Website. This website is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and links to Amazon.com.

    Disclaimer

    Read the full Disclaimer policy here.

    Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. We have made every effort to ensure that all information on this website is accurate. We make no guarantees regarding the results that you will see from using the information provided on the website. We are individual investors, not financial advisors, tax professionals or investment professionals. All information on the site is provided for entertainment and informational purposes only and should not be considered advice. Do not make investment decisions based on the information provided on this website. This website may discuss topics related to finance and investing. The information provided on this websites is provided “as is” without any representations or warranties, express or implied. The website makes no representations or warranties in relation to the financial and investing information on the website. You must not rely on the information on the website as an alternative to advice from a certified public accountant or licensed financial planner. We assume no responsibility for errors or omissions that may appear in the website. You should never delay seeking financial advice, disregard financial advice, or discontinue professional financial services as a result of any information provided on the website.

    Copyright © 2022 Retire Before Dad · Custom site by Moonsteam Design

    loading Cancel
    Post was not sent - check your email addresses!
    Email check failed, please try again
    Sorry, your blog cannot share posts by email.