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What Would You Do with $100K in Cash? 💸

What Would You Do with $100K in Cash? 💸

Helping a fellow parent through a fun problem to have

Dollar Dad
October 23, 2024

In partnership with

Read time: ~4 minutes

Welcome Back, Fellow Parent

Let’s paint a picture for a second: You’ve just sold your home—goodbye, endless DIY projects and that squeaky screen door that never got fixed—and suddenly, you’re holding onto $100K in cash.

It’s a little like being a contestant on a game show where you have to decide what to do with the grand prize.

Except it’s real life, so as long as the home you sold was your primary residence for at least two years, you won’t have to pay any taxes on the $100k in earnings (unlike the 40%+ tax rate you’d be spending on those game show winnings).

I was catching up last week with one of our awesome subscribers who is in this exact position. The big question we talked through is:

"What should I do with this money?"

If you’re like them (or just dreaming of being in their shoes), today's newsletter is all about how to use that windfall wisely.

Whether you’re paying off debt, investing for the future, or eyeing a new adventure, the right move can set you up for long-term success.

Let’s dive in.

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Take a Deep Breath and Evaluate

Before you start mentally spending that cash on all the things you've been eyeing - like that epic family vacation to Italy - it’s important to take stock of your finances.

Ask yourself:

What are your financial goals?
Are you currently on track with your goals?
Now that you’re flush with cash, do you need to reevaluate?

I’m not saying you shouldn’t splurge on something great - you’ve worked hard and earned it!

Just take a beat before making any big purchases.

Smart Ways to Use $100K

Now that you’ve had a moment to reflect, it’s time to talk about some smart ways to put that $100K to work.

Whether you want to build a safety net or make that money grow for your future, here are a few solid strategies.

1. Build an Emergency Fund

Let’s face it—if the past few years have taught us anything, it’s that life can throw us some pretty wild curveballs. If you don’t already have an emergency fund in place, now’s the time to build one.

The “experts” of the internet will tell you to aim for 3-6 months of living expenses. Honestly, it depends on you and your situation. If you’re in a career that is in high demand and you can find alternate employment, 3-6 months may be sufficient. Otherwise, consider adding some padding and shoot for 6-9 months.

Keep this cash safely tucked away in a high-yield savings account or build a CD ladder. With interest rates coming down over the next 12 months or so, you may want to lock in a guaranteed rate through a CD ladder.

2. Pay Off High-Interest Debt

Remember when we all collectively swore off debt in our 20s, only to be hit with student loans and that sneaky credit card balance from Black Friday sales?

If you have any high-interest debt, especially credit cards, consider using your cash to pay off your balances. You can also consider a personal loan or balance transfer credit card.

3. Invest for Your Future

If you're already sitting comfortably with your emergency fund and your debt is in check, why not let that money grow?

Consider increasing your retirement investments. Whether it’s through your employer’s sponsored plans (401k, 403b, etc.), or a personally held Roth IRA or brokerage, it’s never a bad idea to put money aside for your future self.

If you’re unfulfilled in your career, you can use some of the funds to invest in additional education. Whether it’s a coding boot camp, an MBA, or even a certification course to advance your career, using part of your money for education can have a huge return on investment.

4. Consider Real Estate or Start/Buy a Business

Feeling entrepreneurial? You could use that $100K to make a smart real estate investment—buying rental property for passive income, or putting money into a REIT (Real Estate Investment Trust). While real estate can be unpredictable, it’s historically been a reliable way to build long-term wealth.

If you’ve got a side hustle idea or have been thinking about buying an existing business, now’s your chance to make it happen.

Whether it’s a small online store, a local service, or a franchise, starting or buying a business could be a game changer for your financial future.

Just be sure to research the market and understand the time commitment that comes with running a business.

This could be the moment when you shift from working for someone else to building something of your own—whether it's a real estate empire or the next big side hustle.

Make Sure to Have Some Fun Too

Look, there’s no one-size-fits-all when it comes to handling $100K. The best financial decision is the one that fits your life, goals, and yes—dreams.

But hey, don’t forget to have a little fun with it too. Maybe it’s time for that family vacation you’ve been putting off (think Disney, but this time, you stay at the nice resort).

Or perhaps you invest a small portion in a hobby that makes you happy—because, after all, money is a tool to help us live better lives, not just crunch numbers and balance spreadsheets.

So whether you’re planning for the future, building a business, or even treating yourself a little, remember: make sure it’s a move that’s going to bring you peace of mind and a little joy.

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