I have a spare 2 million, what do I do with it?

A question that comes up in various forms more often than you may think. First world problems perhaps, but problems nonetheless.

Since one-size-fits-all solutions don’t exist (unless you are being sold a product), answering the question requires some context.

3 Broad Categories

1. You don’t need the money now or in the future.
2. You are not sure if you are going to need it in the future or not.
3. You are going to need it in the future.

Don’t need it

That’s great. Now to decide how to use it in a way that will add the most value to your life.

• Fulfil a bucket list item – travel, experiences.
• Donate it – fund a charity or good cause. Sustainably preferably. You can give up to 10% of your income away to PBO a year and deduct from taxable income. A well structured portfolio may allow you to do this on an ongoing basis rather than a once off lumpsum.
• Help a family member. Setting up a retirement account for the grandkids could be an incredible way to change their lives. It keeps the money focused on the long-term as they can’t access it until later in life.
• Maybe a combination of all the above.

Not sure if I will need it

There is some planning required from your side. Some questions to ask that may help you in this regard:

• How does this money fit into the rest of your finances?
• Are there any gaps you need to fill? (Estate Liquidity, more comprehensive medical cover)
• What do you need to live off now and in the future?
• How much is enough to comfortably secure that?
• Build  in a safety net because life happens.
• What do you have left? See 1 above.

I will need it in the future

Refer to planning in 2 above if you are not confident in how you can make the most of this money. Leaving it in the bank for an extended period of time is not likely to serve your best interests.

• Do you need it to supplement your income?
• Or are you trying to the preserve the purchasing power of the capital?
• When will you likely need to use the funds? Time horizon.
• What are your expected uses or cashflow requirements?
• What are your biggest concerns about putting this money to work if any? Losing  money or losing access to the money?
• Have you thought about later life care, estate planning and liquidity?
• What taxes are you likely to be paying?

Importance of Context

This sort of context allows you to construct a solution that not only answers the question of what to do with the money but it also ensures you put it to work in the most meaningful way for yourself.