‘I plan to draw $2k/mo to supplement income and have fun money’: I’m selling my business for $425k profit – Should I pay off debts, build an emergency fund, or invest with a financial advisor?

Hey Money Minder,

So, I’m selling my business for $650k (about 64900USD) and hoping to walk away with $425k after all is said and done. I usually make $100k a year and manage to save about $1k a month after all the necessary deductions. Planning to take out $2k a month from the sale money for some extra cash and fun.

I’ve never had this much money before, so I have a couple of questions for you:

1. Should I pay off my car loans?
   • 2021 Jeep Wrangler, owe 25k @ 6.2% with 6 years left
   • 2018 Chrysler Pacifica, owe 30k @ 4.9% with 4 years left
2. Do I really need a separate emergency fund if I already have money in the stock market? I mean, even if it all crashes, I should be okay… right?
3. Should I hire a financial advisor to invest it with a 0.75% fee, or just dump it into the S&P 500? The idea of someone taking a cut of my money doesn’t sit right with me.

I’d appreciate any advice you’ve got, thanks a bunch!

Cheers,
Money Maker

Response from THE MONEY MINDER:

Hello There,

Congratulations on selling your business for $650k! It’s an exciting and significant achievement. Based on your post, it seems like you have put a lot of thought into how to manage this newfound wealth, which is a great start.

Regarding your questions, paying off your car loans could be a wise move, especially given the interest rates. Eliminating that debt can free up additional cash flow for you to save or invest. I would suggest prioritizing the higher interest rate loan first, the 6.2% on the Jeep Wrangler, to minimize the amount you pay in interest over time.

In terms of emergency funds, having a separate fund even when you have investments in the stock market is still advisable. Market fluctuations can impact your investments, and having liquid cash available for emergencies provides added security and peace of mind. While you may feel secure with your investment portfolio, having that separate emergency fund can protect you from unexpected financial challenges.

As for investing the proceeds from the sale, you have a choice between using a financial advisor or investing in the S&P 500. While the idea of paying a fee to a financial advisor may seem off-putting, their expertise can help you navigate the complexities of wealth management and provide tailored advice based on your financial goals and risk tolerance. If you feel confident in managing your investments and are comfortable with the hands-on approach, investing in the S&P 500, a high-performing index, could be a viable option.

Ultimately, your financial decisions should align with your long-term goals and risk tolerance. It may be beneficial to consult with a financial advisor to discuss your options and create a personalized investment plan that suits your needs. Remember to take your time, do your research, and make informed decisions to ensure your financial success in the future.

Best of luck with your financial journey ahead!

Farewell from THE MONEY MINDER