Friday, May 24, 2013

Managing a Windfall

Chinese people traditionally give cash gifts instead of stuff at holidays and weddings, so for every birthday and New Year's since he was a baby until he married, his family gave him cash in traditional red paper envelopes. These are called ang pao in Malaysian Hokkein Chinese, or hong bao in Mandarin.

I'm holding non-traditional Hello Kitty, Mickey Mouse and Minnie Mouse hong bao I purchased in Flushing, Queens for Chinese New Year 2013, the year of the snake.

While I always thought I was fiscally responsible when younger, I pale in comparison to CodeMonkey, who was so devoid of consumerist desire he handed every single red envelope to his parents, unopened. My in-laws, being sensible people, invested them on his behalf, and the money sat and grew until my father-in-law, impressed by my financial savvy, decided to reveal the existence of this account to us and offered to send the money along.

I confess that when this happened, my jaw nearly hit the floor. I asked my husband if he ever once considered spending all that money on toys, clothes, candy, ANYTHING, and he said he'd had everything he'd needed, so why would he? My husband is awesome.

This leaves us with the sort of problem most would kill to have. The money is enough to finish funding our Roth IRAs for this year, pay off the last of my student loan debt, and leave about $7,000 besides. We're trying to figure out what to do with that leftover money.

1. Add it to the emergency fund.
We have three months of expenses in there now; this would bump it up to about 5 months' worth.

2. Invest it in a taxable brokerage account.
We could invest this in another Vanguard taxable fund, since we've maxed out the IRA space for this year. Potentially we could move this into a Roth IRA come 2014.

3. Put it in checking and slowly draw it down while funding a 401k.
I become eligible for a 401k in August, after a year at my employer. We could then put 100% of my remaining 2013 pre-tax pay into the 401k, allowing us to maximize tax-advantaged saving space and slowly draw down the $7,000 to bridge the gap between CodeMonkey's income and our expenses until the money is gone, when we could reduce my 401k contribution.

4. Save for an apartment.
Every time I've run the numbers for our area it's been better for us to rent than buy, but maybe we should start saving up for some tangible property? $7,000 is hardly an adequate downpayment, but maybe it's a good way to start one.

Ok, not really at all. But I figured I might as well mention it as an option.

I'm typing this while sipping a Tall Chai Latte from Starbucks, which is the first sugared thing I've had since I announced my quitting. Not great, but this has to be the longest I've gone without sweetened food in months, if not years, so I'll chalk it up to a small victory. And I normally order a venti. Baby steps, I guess?


  1. Not a bad problem to have. Is the money already in your husband's name? Or is it going to be something where you need to account for gift taxes or capital gains if you sell any of the investments?

    If it were us, I'd be tempted by the 401K plan, depending on your employer's match. It might be a nice way to get a quick multiplier on that money in the short term while saving for the long term, too.

    What does your husband think? Considering this is his b-day and holiday money from so many years, is there anything that he's got his eye on or a nice big "want" that you could knock out and say, "Happy First, Second, Third, Fourth.... Twenty-fifth... Birthdays!" After all, that was the original intent of the money, presumably. =)

    1. Gift taxes aren't a concern for us, thankfully. We've split the money so it isn't relevant. When my FIL transfers it to us, it'll all go into a joint account. If we put it in a taxable investment account, there'd be capital gain taxes to contend with down the road, though.

      My employer doesn't offer any 401k match; they have a profit-sharing scheme with a vesting schedule, but it's entirely at management discretion, so kind of irrelevant. We'd be sinking 100% of our own money into the 401k. Part of me thinks I'd be better off in a taxable account, if the investment options through my employer are lousy.

      I asked my husband what he'd like to do with the money. "Possibly replace my phone. It's dying." He's the least acquisitive person I've ever met. He would like a better electronic keyboard (about $2,000), but that's a business expense we'll make, probably next year. Again, his current one is dying. Someday, after we own an apartment (pianos don't like being moved) he's like a baby grand, but that's a long way off.