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TL;DR: we have a little over 50k in cash in the bank, my spouse has real estate worth over 100k overseas, no debt or mortgage, and one child (under 1 year). What is the best thing to do with what we have?


My spouse and I are in a bit of an odd financial situation. As stated above we have quite a bit of cash here in the US, and she has real estate in her maiden name in the country she's from that's worth roughly 100k. We've been trying to decide what we should do with this money, such as investing or saving. 

Some other details:

  • We have no debt at all
  • We have $6000 saved in an emergency fund (not included in the 50k)
  • My monthly take home pay is about $6800
  • We have two cars, one we own outright is 10 years old and the other is on a 2 year lease that will expire in August (for credit score reasons). We need to have two cars but the lease on the one car is up soon and the 10 year-old car is starting to get more expensive to repair and maintain
  • My spouse would like to go to medical school, so that'll be a large expense in the coming years
  • I am currently trying to bootstrap a software company
  • We have a baby, so college and such is a concern down the road too 

So the question is: What is the best thing we can do with this money, all things considered?

We have looked at potentially buying an investment property, buying a property for ourselves to live in, leaving the cash to accrue interest, using the money for medical school, etc... All we have done so far is to bring our credit score up (low score because of no debt). There seem to be many options and no clear choice of what should be done.


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A few more things to clarify:

  • The lease on the car was paid in full up front (car was worth $21,000 new, we paid ~$5000 for the two years) with the option to pay the rest of the car once the lease is up
  • Our actual expenses per month are about $2800, leaving $4000 from the take home pay as extra
  • My spouse will only be entering medical school within 2 years at the earliest, and will likely be there for about 4-5 years. If she get's into the school she wants we would not have to move
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I would say that, for the most part, money should not be invested in the stock market or real estate. Mostly this money should be kept in savings:

I feel like your emergency fund is light. You do not indicate what your expenses are per month, but unless you can live off of 1K/month, that is pretty low. I would bump that to about 15K, but that really depends upon your expenses. You may want to go higher when you consider your real estate investments. What happens if a water heater needs replacement? (41K left)

EDIT: As stated you could reduce your expenses, in an emergency, to 2K. At the bare minimum your emergency fund should be 12K. I'd still be likely to have more as you don't have any money in sinking funds or designated savings and the real estate leaves you a bit exposed. In your shoes, I'd have 12K as a general emergency fund. Another 5K in a car fund (I don't mind driving a 5,000 car), 5k in a real estate/home repair fund, and save about 400 per month for yearly insurance and tax costs.

Your first point is incorrect, you do have debt in the form of a car lease. That car needs to be replaced, and you might want to upgrade the other car. How much? Perhaps spend 12K on each and sell the existing car for 2K? (19K left).

Congratulations on attempting to bootstrap a software company. What kind of cash do you anticipate needing? How about keeping 10K designated for that? (9K left)

Assuming that medical school will run you about 50K per year for 4 years how do you propose to pay for it? Assuming that you put away 4K per month for 24 months and have 9K, you will come up about 95K short assuming some interests in your favor. The time frame is too short to invest it, so you are stuck with crappy bank rates.

  • I've added some more information to the original question to try clarify a bit more. I anticipate the startup expenses to run fairly cheap at $500 for a little while (sans employees). Basically just various accounts and service needed. Also how many months of emergency fund would you recommend? If we trim a few expenses we can have it last for 3 months at the moment. – Someone Mar 2 '17 at 20:57
  • Answer edited, please see my thoughts. – Pete B. Mar 2 '17 at 21:14
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My spouse will only be entering medical school within 2 years at the earliest, and will likely be there for about 4-5 years. If she get's into the school she wants we would not have to move

This is probably the biggest return on investment that you can get. Sure, you could invest what you have in the market and take out tens or hundreds of thousands of dollars on "cheap" medical school loans, but consider this:

  • What is your wife hates medical school, or decides not to be a doctor? If there's no "cash" invested it will be easier (psychologically) to walk away, and then you've still got the student loans but not the extra income to pay them off
  • Paying for medical school with cash will force you to live on a lower budget
  • She can take the job she wants the most, rather than feeling like she has to take the biggest paycheck to pay off the loans
  • Paying cash will help you find a school that you can afford and keep expenses to a minimum.

Figure out how much you need for all 4-5 years, and develop a plan to make sure you can cash-flow the entire education.

Bootstrapping a software company has potential for high rewards, but a much greater risk. you could get 10X back or you could lose it all.

With your income, you've got plenty of time to save for college, so I don't see that as a huge win now.

I would also dump the lease - you can probably get a much better car for $16k that the five-year old one you have when the lease is up. (or get a similar car for less money). With no debt and a good income you do not need a credit score. The lease probably didn't help it that much anyways - you're paying more for the lease than any benefit you would get by a higher score.

  • +1 for dumping the lease. Leases can be good in some situations, but there are much cheaper ways to build credit. – Jacob Jones Mar 3 '17 at 2:02
  • Getting rid of the lease was an option that we were seriously considering, and then getting a used car instead. Since we had a pretty bad credit score because of no debt and we needed a second car, we thought it was a reasonable choice. But at this point I agree with both of you that tossing the lease would be a good idea. – Someone Mar 3 '17 at 17:21
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I have been on the same boat as you are right now. So basically, it depends on your goals, risk tolerance, upcoming life events! You want a plan not just for this particular 50K, but for your household assets and future earnings to come!

My suggestion: Get a flat fee, online financial advisor to do the work for you. You don’t have to figure this out by yourself.

Personally, I would invest in a portfolio that:

  1. Offers dynamic asset allocation plans that evolves over time based on changing market conditions.

  2. Offers a healthy mix of beta and alpha strategies along with the liquidity and ability to monitor activity online.

  3. Has structural risk management in place. Risk management is as much about increasing risk as it is about cutting risk. Therefore, you want a plan for de-allocating and re-allocating risk

Hope this helps.

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  • Get rid of the lease and buy a used car. A good buy is an Audi because they are popular, high-quality cars. A 2007 Audi A4 costs about $7000. You will save a lot of money by dumping the lease and owning. Go for quality. Stay away from fad cars and SUVs which are overpriced for their value. Full sized sedans are the safest cars. The maintenance on a high-quality old car is way cheaper than the costs of a newer car.

  • Sell the overseas property. It is a strong real estate market now, good time to sell. It is never good to have property far away from where you are.

  • You need to have a timeline to plan investments. Are you going to medical school in one year, three years, five years? You need to make a plan. Every investment is a BUY and a SELL and you should plan for both.

  • If your business is software, look for a revenue-generating asset in that area. An example of a revenue-generating asset is a license. For example, some software like ANSYS has license costs in the region of $30,000 annually. If you broker the license, or buy and re-sell the license you can make a good profit. This is just one example. Use your expertise to find the right vehicle. Make sure it is a REVENUE-GENERATING ASSET.

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    If you're really just wanting a car that'll last forever, get a 4-cylinder Toyota Camry (or Avalon). The engines and transmissions are somewhat of a legend among mechanics. They just don't break. They aren't very exciting or fast though, if that matters to you. – Jacob Jones Mar 3 '17 at 2:01
  • Audi's are overpriced Volkswagens. Their reputation for quality is used up in the blowback from the emissions scandal. Agree on Toyota and Honda for dependable cars. 5-7 years old. Look for unsexy cars like 4 door hatchback or station wagon or a sedan. Stick with gas 4-cylinders for mileage, availability of parts and mechanics, and lower environmental impact. – Xalorous Mar 31 '17 at 2:27

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