# Making an livable income for a single person with an inheritance?



## Blink (Jul 3, 2011)

Hello, 

Let me start by saying a few things, one being that I'm new here and if this question is in the wrong place I am sorry. Also, that I'm fairly clueless when it comes to these things so if my questions are confusing in this post please ask me to clarify.
In a nutshell, when I was younger, a family member passed away and left some money behind for me and my brother. 
Since then that inheritance has grown to roughly $200,000 CAD.
What I was wondering was this: Is there any way, no matter how obscure (So long as it is legal) that I can make a livable income for myself with that money, and still maintain SOME growth? Perhaps even something "Close" to a livable income? So that I could work less, as I have a fairly unfulfilling job at the moment.
I'm simply trying to consider all my options at this point, so by all means suggest away. 

I suppose I should clarify what a livable income is to me, my rent is $500, vehicle insurance is $400 a month, and then less than $200 for bills, and food being $300. On top of the above, Gas and other living expenses could be anywhere between $400 and $600 a month as I drive frequently.
I'm am neither married nor divorced and have no children. 

Thank you very much for at least reading this, as I have been asking this question for 2 years and have never really gotten an answer.


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## Henry (Jul 12, 2009)

Short answer is no.

Your monthly cost is around 2000 dollars. Your annual living cost is 24000 dollars.

Lets say you invest in dividend stocks that yielding about 3%. With 200k, that is an annual dividend of 6000 dollars. You will have a short fall of 18000 dollars. That means 200k will last you around 9 years. Continue working with a goal of career development is a good choice.

I am not sure where you live, but 400 dollars a month for auto insurance is on the high side. 400 to 600 dollars a month for gas is very high unless your commutes are really far or your job requires a lot of driving. You spend half of your living expenses are your car. If you can save 200 - 400 dollars a month from insurance and gas, then that might make a difference. Otherwise, your spending seems to be quite reasonable. You can shop around for insurance.


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## Karen (Jul 24, 2010)

I guess you didn't notice, Henry, that the OP lives in BC, so he can't shop around, at least for his basic auto insurance. He has no choice but to buy that from ICBC, our government-owned insurance company.

But I agree with Henry that there's no way you can make $200,000 last you the rest of your life, Blink. You've not given us enough information to make informed suggestions, though. You didn't say whether the $200,000 is the total amount, to be divided between you and your brother, or if that's your share, and you didn't tell us your age. You do say that you have no dependents, but is that likely to last forever?

I'm not the right person to be giving you investment advice, but if you post a little more information, you will probably hear from others who are more knowledgeable. I have only a couple of general thoughts - one is that, if you have any special interests or skills, the money might be enough to start a business; the other is that, if it were me, I would use that money to establish a retirement plan so that you will be able to retire earlier than you otherwise would.

Good luck - it's a nice problem to have!


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## w0nger (Mar 15, 2010)

use the money and go back to school to get the job that you want. that's a good investment.


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## Henry (Jul 12, 2009)

Karen: Thanks for pointing that out. For supplementary insurance, Canadian Direct Insurance offer competitive rates.


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## Karen (Jul 24, 2010)

You're right, Henry - that's why I specifically referred to his basic auto insurance.

w0nger's suggestion of using the money to go back to school is a good one.


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## Blink (Jul 3, 2011)

Hello, To answer your questions.
I'm 20 years old, and that is the total for me personally.
I don't plan on having children or a wife for some time.
Thank you for your responses, how about day trading?
Do brokers exist that would take a percentage to day trade for me?
Suggestions are appreciated, even those including high risk factors.
Also, the reason my insurance is so expensive is because I have a motorcycle and a car.


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## Addy (Mar 12, 2010)

Henry said:


> Karen: Thanks for pointing that out. For supplementary insurance, Canadian Direct Insurance offer competitive rates.


But CDI will only insure particular vehicles. ie ones that are worth it to them financially.


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## Square Root (Jan 30, 2010)

I hope you were joking about day trading as that would be a terrible idea. Use the money to advance your education. That is by far the smartest thing you can do with it. the decisions you make at this age will determine to a large extent how successful you are in life. education is key!!


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## m3s (Apr 3, 2010)

I 3rd that school is a good investment

I also understand the lure to making your money work for you with risky investments. First I would take a cooling off period. Second I would not rush out to pay someone to actively manage your money. They will make more than you over time. Third I wouldn't rush to invest it all at once, the markets could tank this year

If you don't want to manage it yourself I would invest slowly into a couch potato portfolio or set only a certain % aside for risky "day trading"


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## kcowan (Jul 1, 2010)

The other option might be to use the money to buy a franchise into a business that you can grow. The amount is marginal for most good franchises though.

But education is probably a better use of the money at your age.


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## peterk (May 16, 2010)

The bad news is that kinda money won't sustain you indefinately, so you're still going to have to work 

The good news is you came here before you gave away your money to some mutual fund manager or "day trader"
The actual good news, at least in my opinion, is that you no longer have to worry about saving for your retirement Blink. You're very fortunate to be given this money at such a young age.
If I were you this is what I would do.. Keep it all banked right now. Read up a bit about couch potato porfolios and passive investing. If you want to become an active investor and a "day trader" that's fine, but there is absolutely no shortcut to it without getting horribly burned. It will take years of learning, is that something you actually want to do? 
Keep that money invested in stock market ETFs, forget about it, and it will grow. Continue with your career, spend all of your salary carefreely, live your life well, and in 30 years when you want retire early at 50, you'll have 2+ million waiting for you. 

It's easy to see how you could *almost* make that money sustain you throughout your twenties, and it would be tempting to not have to work at such a young age, but remember that after that you'll still have another 60+ years of living to do.


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## the-royal-mail (Dec 11, 2009)

Why not make a down payment on a house for yourself with that money? You will still have to work. You're too young for that amount of money to allow you to retire. 

My investments have not grown this year. Investment growth is not a given.

You could also spend $20-30K on a new car with this money if you wish.


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## sags (May 15, 2010)

I am wondering about rental real estate, such as an apartment building. 

What kind of a place would a 200,000 down payment buy?

Perhaps you could create your own job by living in the building and doing all the maintenance work, rentals, and rent collections.

Pay yourself a salary instead of a company or other individuals.

We used to have a travel trailer parked at a marina north of Parry Sound. They had about 7 rental cottages, rented about 10 trailer sites, and collected yearly rents from docks for 200 boats. Most of the cottages on the lake only had lake access. They also had a general store, gas, propane, boat rentals, taxi service etc.

Two older brothers owned it and they sold the place for 1,000,000.

It was generating a very good income for both of them, and they had little ambition. They just didn't want to spend the time anymore, and had no desire to take on any more work than they had to.

There probably are opportunities such as this around.............


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## Square Root (Jan 30, 2010)

A new car would be the obvious thing for a 20 year old. Also a very bad idea unless he really needs it.


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## Four Pillars (Apr 5, 2009)

Along with bad "new car" idea, I also don't think he should buy real estate of any kind.

Real estate can really limit your mobility - he needs to work on his career which could entail moving around a bit.


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## cannew (Jun 19, 2011)

What is your time frame?  As mentioned $200K will not support you for a long period, but if you are looking to invest your funds then there are options available and your investment should grow over the longer term.

Your current goal says obtaining a livable income, but when and can you continue to contribute towards your investments. If you are in your 30's or even 40's and are looking to live off your investments 20 years down the road, then you've got a great start and should be able to reach that goal.

Lay out your objectives and start planning on what you need to achieve from your investment to reach that goal. Remember the markets don't go up or down in a straight line, so you can't just project a 6% to 12% forecast annually.

There are many types of investment approaches and you should evaluate each to see which offers the approach which suits your risk tolerance and goals.

My preference is the Dividend Growth strategy. By investing in solid dividend paying stocks (not mutual funds or even ETF's) you should be able to receive 3.5% to 5% in dividend income in todays market. If those companies grow the dividend than your income will increase as should the stock value. By reinvesting the dividends you can compound the growth by purchasing additional shares which pay more dividends.


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## Cal (Jun 17, 2009)

In all honesty I would worry less about the money at this point, and more about figuring out what would make your life fulfilling and persue that interest.

Invest the money, or use it for education. But figure out what to do with your life that would make you happy first.

All the best! And enjoy the forum.


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## Sherlock (Apr 18, 2010)

I say invest the money in a balanced portfolio then forget about it and live your life as if you didn't have it, then retire early at 55.

If you put that money in a conservative portfolio earning only 5% you will be able to retire at 55 with $1.1 million even if you never contribute another dime to your retirement savings. If you average a still-reasonable 8% you will retire at 55 with $3 million!


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## KaeJS (Sep 28, 2010)

Cal said:


> *In all honesty I would worry less about the money at this point, and more about figuring out what would make your life fulfilling and persue that interest.
> But figure out what to do with your life that would make you happy first.*


This has been the hardest thing for me (and for most, I'm sure).

You really do need to find something that you enjoy, but generates at least some income.

I'd keep 50k of that 200k cash, invest the other 150k in balanced funds.


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## Oldroe (Sep 18, 2009)

Look up compound interest. This is what most are referring to.

Education great idea, Having some fun great idea.

Get your money in solid dividend paying stock/etf's and let that compounding work. 

Others on this site will steer you to great etf's and this might be a better idea for you.

Day trading bad bad bad idea.

Higher risk investments at this point bad and really bad and never more than 5% of your money.

So 20k if fun money, 50k if education works, that's 150k-175 and you will be on easy street my 35.


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## Four Pillars (Apr 5, 2009)

If you are serious, check out this blog (and the book).

http://earlyretirementextreme.com/

If you follow his lifestyle, you can probably get by with the $200k and very part-time work.


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## slacker (Mar 8, 2010)

Consider moving to a foreign country with ultra low living expense, $200k CAD can probably last you several live times. Canada and most of the western world is simply too expensive for $200k to last.

If you're looking for risk, day trading is a terrible option, casino may give better odds.


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## Elbyron (Apr 3, 2009)

I'll be the 5th person to echo this: Don't get into day trading. If you do, and somehow manage not to go broke after spending a couple years learning how to do it successfully, you'll still find that it's not easy money - a lot of constant research has to be done to turn a profit. And paying someone else to do it will just put the money in their pocket while you take all the risks. If you want to learn this lesson the hard way, you may as well just go to a casino and gamble it all. At least the cut that the house takes will be less than what an active investor would cost you!

You indicated that you don't like your job. Well, now you've got a great opportunity to do something about it! Rather than looking for high-risk strategies that have a slim chance of letting you quit and retire very early, you should really consider planning a life that involves a job which you will enjoy. Having a job you love is one of the best things in life (having a person you love is also very good. I don't have kids yet but I hear that's also a good source of happiness). Your first step is to figure out what you like doing. That can be hard to do, but a good starting point is making a list of what aspects of your current job that you like and dislike. Add some other job features that you think you would enjoy, and then see if you can identify a career that meets these criteria. With $200K at your disposal, no career is out of reach, though some may require hard work as well as money to obtain the necessary education. 

If you're still stuck and can't figure out what kind of career you want, try Googling "career test" and try out a few of the free questionnaires. This one looks good.

As for the money, investing in a couch potato portfolio is probably the best suggestion mentioned so far. Either re-invest the earnings and build a nest egg for early retirement, or withdraw them and spend it on yourself. Maybe use the earnings to buy lottery tickets, to satisfy your urge to get rich quick on high-risk activities!


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## w0nger (Mar 15, 2010)

i didn't realize his young age... and i hate to be the realist... but a 20 year old with that much free cash is just a recipe for disaster in the future. At least... statistically. Seek real and practicle advice. prove the stats wrong and do something positive with your money.


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## Financial Cents (Jul 22, 2010)

Use the money to invest in you, get a degree. A well-paying job for the next 30 years will last much longer than, although nice, that inheritance.


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## financialnoob (Feb 26, 2011)

I like the idea of investing by going back to school.

If you hate your job, it's the perfect opportunity to find one you like.

I like the idea of having some money for fun too, say $20K for traveling during the summers, $50K for school, and put $15K into a TFSA right away and the rest could be invested using a couch potato strategy, or set up a GIC ladder. 

That way, when you're done school, you've still got a nice down-payment on a house.

It isn't enough to retire anytime soon, but it's a heck of a great start to be out of school with a degree, no debt, and enough for a sizable chunk of a home of your choosing.


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## Causalien (Apr 4, 2009)

The thing I could do with that money at that age...

Anyway, the only sustainable periodic way of investing to generate a livable income is by selling monthly put options. That in itself is a huge risk and will definitely burn someone as inexperienced as you.

You also need to get out of BC. Car insurance there is unsustainable if you don't want to ditch your car hobbies. And if you want sustainable living, the possibility of ditching your car hobby might have to be considered. Because then, your monthly expenses is only $1000 and that is much more doable. Double that amount and you need double the capital and doubling from $200 000 is a lot harder than doubling from $100 000 because it is not probable with a normal run of a mill job.


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## MoreMiles (Apr 20, 2011)

Causalien said:


> The thing I could do with that money at that age...
> 
> Anyway, the only sustainable periodic way of investing to generate a livable income is by* selling monthly put options.* That in itself is a huge risk and will definitely burn someone as inexperienced as you.




What if there is a really crash in the market? With all the uncertainties these days, it is not impossible. So that put option sale would cost 50% in asset loss?

I guess you can spread it with another buy... but it's really not for a beginner.


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## the-royal-mail (Dec 11, 2009)

Well said, causalien. I agree with everything you wrote.


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## Causalien (Apr 4, 2009)

MoreMiles.

Depends on when you sold the option. There are inconsistencies in option valuation regarding risk. To put it simply, when the vega is high enough to cover the cost. There's always some type of crash and burn each month... and the subsequent technical correction. 

Then again, I am familiar enough with options that I can glimpse at all the greeks in one shot and map out the risk premium to theoretical value in my mind. This is the skill you gain after staring at options day after day for 3 years and this skill is necessary for options trading.


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## steve41 (Apr 18, 2009)

OK.... from the sublime (day trader) to the ridiculous. Let's say, if it were available, you could get a 3% indexed annuity to bridge you out to 65 when your OAS & GIS kicked in. Assuming 3% inflation, here is what your "life" would look like.... I am 20 years old with 200K This brings new meaning to the concept of minimalisim.


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## Brian Weatherdon CFP (Jan 18, 2011)

Dear Blink, I can hardly recall when I was 20...however I have know some terrific young people who are creating their future and making solid investments to achieve what they want for themselves. 

You'll probably live another 70 years or so. All in CMF agree... your #1 best investment is exploring a field you can enjoy & keep up with for the next 35-45 years and invest your time & money into achieving this. 

A young friend & client of mine independantly (without me at that time) saved a significant sum in his 20s. He did this through education, tough mental focus, and getting a job he enjoys. His financial investments include a portfolio of dividends and Cdn/intl equities, plus now the house in which he lives. He's still single like you, yet he has prepared himself to be ready & expand his life & family as & when he's ready. 

Dream high, and stretch yourself day-by-day to gain what you want most for the next 70 years.

Cheers!
BW


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## cannon_fodder (Apr 3, 2009)

steve41 said:


> OK.... from the sublime (day trader) to the ridiculous. Let's say, if it were available, you could get a 3% indexed annuity to bridge you out to 65 when your OAS & GIS kicked in. Assuming 3% inflation, here is what your "life" would look like.... I am 20 years old with 200K This brings new meaning to the concept of minimalisim.


Steve,

I just want to say that I appreciate all of the free information you post here. Even though it doesn't help me personally, I think it is laudable that you continue to take the time to offer examples for so many cases of individuals looking for advice.

And I fully suspect that there is no ulterior motive other than a genuine desire to help people no matter what some cynics might think.

If I had a hat, I'd tip it to you sir.


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## dubmac (Jan 9, 2011)

steve41 said:


> Let's say, if it were available, you could get a 3% indexed annuity to bridge you out to 65 when your OAS & GIS kicked in. Assuming 3% inflation, here is what your "life" would look like.... I am 20 years old with 200K This brings new meaning to the concept of minimalisim.


Steve41...
This is a very helpful link that you provided! May I ask where/how you generated the personal profile (Mr-I-am-20) with the annuity projection? Is it a downloadable program from somwhere? The reason I ask is because I have a relative who is 50. She has inherited a sum of $ (500K), and is frankly, unlikely to work again due largely to mental health reasons. In every other respect she is healthy, likely to live a "normal" life span. She has no dependents (sp?), her parents have passed away, and we are here closest relatives. If you can pass along the link so that I can do some projections for her personal planning, I would be grateful...(ditto on cannon-fodders thank-you to you...well put)


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## steve41 (Apr 18, 2009)

The reason I post these plans is a tad self-serving. I author the program. It is not a web-based tool, rather it is a program. It is a Windows program and runs on most versions of Windows except W7 Home Premium. It needs Pro or Ultimate (XP mode) to run on Windows7.

You can download a free demo version and play with it for 60 days.

One reason I do this, is that it takes me virtually no time to source up, run and post the results. You wouldn't believe how quick and painless it is once you get the hang of it. (i.e. there is a learning curve)


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## Causalien (Apr 4, 2009)

Why don't you make a web version with ads, but sell the full version without ads for those that want it? You can then data mine and ask for agreement to store the data. At the same time, sell the data to marketers 

It's not likely that we'll buy these if we have excel. But I might use your web version for the convenience of not having to think.


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## kcowan (Jul 1, 2010)

I will answer for Steve. Because it is too much work. However, he can point you at some FAs that will run scenarios for you (for a fee). Their key value is in spending the time to get a set of assumptions that are appropriate for you.


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## Causalien (Apr 4, 2009)

Sounds like an opportunity. I'll mark it down as the 3rd project in line once I am done with the current project.


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## dubmac (Jan 9, 2011)

steve41 - I'm a little confused here...if it is not a web based tool, then how is it possible to download a free demo versio?


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## steve41 (Apr 18, 2009)

dubmac said:


> steve41 - I'm a little confused here...if it is not a web based tool, then how is it possible to download a free demo versio?


It is simply a freestanding program which runs on windows in the same way any of your windows programs do.... Excel, Turbotax.... etc.

It is downloadable off my site as an install file and it is time crippled.... i.e. it becomes inactive after 60 days. (Unless you splurge and buy it)


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## dubmac (Jan 9, 2011)

thanks steve - I figured it out!


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