mouth covered

Whistler blower wins settlement and gets load of cash, and his friend hops onto the forums asking for advice. I’ve already posted about getting $20,000 and the options that you have, but do things change with a change in magnitude? For most people getting $200,000 is a really big event as $200,000 isn’t an amount the average person is used to dealing with. There’s often a sense that something must be different with this amount of money, and since investing is already a typically misunderstood area, such a windfall can produce a lot of anxiety about the unknown, especially if you get this money at a bad time from a not so great situation.

So, this whistle blower – in what way I don’t know – is looking for some advice and his friend is seeing what he can find. The whistle blower’s situation is a little more complex than just getting a load of cash because he doesn’t have a job anymore, and it could be complicated getting his next job. That in itself could cause plenty of anxiety, and if you’ve got a mortgage and kids in school, then figuring out what to do with a settlement could put a person over the edge. As in any big situation, it’s best to stay calm and have a clear head, don’t rush into any decisions.

The discussion in the forum went as usual. A number of people piped up saying that he should talk to a financial planner. A number of other people said forget the planner, and deal with it himself. Personally, I’m against professionals in this industry, and I’m not a fan of financial planners and such because more often it’s a waste of money as it’s the illusion of complexity that drives people to throw good money at professionals for sub par results – results you will have, but on average they’re not worth the fees. However, piece of mind has a lot of value, and in a situation like this, the extra price for piece of mind could be worth it – knowing, or assuming, that someone else is working in your best interest who also understands the landscape of options.

I don’t see much difference between $20,000 and $200,000. For the whistle blower, he should take out a few months worth of money, so he can pay bills while he’s getting another job, look at reducing his debt, and then invest the rest. What do you invest in? The same things that you’ve always been investing in. $200,000 might cause you to rethink your asset allocation, but it probably won’t do that substantially. If you add in another level of magnitude, $2,000,000, then you’ll want to think about shifting your allocation possibly, but you still have the same investment options (index funds).

The biggest issue with this money is the taxes. The only professionals that I do like (to an extent) are tax agents. The government will definitely want its share of this new money, and the less they take, the more you have. In that case, there might be certain investment options that will shield the new funds from excessive taxes, which is good, but don’t expect any miracles. In the end, you’ll have your share left, and you’ll go about investing like usual with all of the standard implications. If you won’t know what those might be, then drop the cash that you don’t need for bills into a total market index fund, and do some research. Once you know more, move the money as you like, but that doesn’t require a financial planner to take a portion of your money as per their fees – however, a tax agent might be able to save you some money and get them self paid at the same time.

As usual, keeping the equation simple is almost always best. Worst case, you have some non-standard tax options to consider, but that’s about it, and that’s all easily manageable by yourself. As long as you aren’t in a rush to spend the money, it can sit in a nice spot like a total market index fund, and wait for you to do something with it. That leaves you time to deal with the hassles of whatever brought you that money.

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