Imagine waking up one morning to see a Genie at the foot of your bed with milk and cookies. She grants you the wish of converting your future earnings or current illiquid net worth into $250,000 cash.
For example, say you were to work for 20 more years and earn a median income of $60,000 a year before taxes. Instead of methodically saving 20% for the next two decades, you can get all that money right now. Would you take it? I bet most would say “yes” since it’s your money and the present value of a buck is greater now than later.
The big question is, what are you going to do with the $250,000? The stock market is volatile, bonds are bubbliscious, and savings interest rates are less than 0.2%! Perhaps you’ll use some of the money to pay off your debts, further your education, and help out your loved ones. Or maybe you’ll invest the money in your start-up company and watch it grow into the multi-millions.
Finally, maybe you’ll do absolutely nothing with the $250,000 and just keep it liquid for a rainy day. The political landscape is pretty horrific as there’s no way the Jobs Act Bill will get passed since it attacks charities and municipal bonds which fund state construction. Massive layoffs are imminent before the holidays despite cashed up corporate balance sheets because demand is uncertain. You might very well be in for rough times, and that $250,000 + $1,600/month in unemployment insurance will help you get through!
Genies are appearing in front of many homeowner’s beds thanks to Ben Bernanke and the Fed’s low interest rate policy. Few people would have ever expected the 10-year yield to drop below 2%, but it has. Cash-out mortgage refinances are tempting people night and day now, but the party can’t last forever. Ben’s nickname is “Helicopter Ben” for making it rain money. I prefer to call him “Bengenie.”
WHAT I’D DO WITH $250,000 OF MY OWN MONEY (REMEMBER, IT’S NOT FREE MONEY!)
* Look for attractive 8%+ yielding 2 bedroom, 2 bathroom rental properties.
* Decide which municipal bond ETFs to buy. Examples: CMF, CXA, HYMB, INY, ITM, PVI, NYF, PWZ, PWA, SHM, SMB, SFI.
* Invest $10-20,000 into the Yakezie Network for better user experience, interface, etc.
* Look for offshore high yielding, but stable assets given the USD will likely continue to remain weak or depreciate.
* Send $15,000 to my parents to help contribute to their home remodeling project. Good luck guys!
* Do absolutely nothing with all leftover funds and wait for a potential recession to come when Obama gets re-elected. There could be much better opportunities in the stock markets as a result.
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Updated for 2017 and beyond.