Ask Paul: How should I invest $250k from my divorce

Hi Paul, I'm 33 with three young dependants and recently divorced.

I am in a situation where I am weighing up putting the proceeds of the property settlement, $250,000, towards a small business, such as a laundromat, to create some financial independence or put it towards building an extension on my parents' house, which will provide us with housing security.

Can you please help me think this through? - Jacqueline

I have a pretty laidback personality, Jacqueline, and not inclined towards anxiety, but here you are making me really nervous.

So I am grateful that you have asked me for a "thought framework" on your issue and not a direct answer.

Clearly I cannot do that. I would need a couple of hours with you to help you to come to your own conclusion. But let me have a crack at the framework I would use to do that.

You are young, that is a positive. Three youngsters will be keeping you busy, though.

As for building an extension on your parents' home, my guess is that you may be living with them, or at least get on well and are getting help with the kids.

Next, we go to your skills and interests and the time you have for work. With young kids, if you could get a good salary with part-time work, I would be thinking that housing security by extending your parents' place is a safe option.

Small business is not easy. You have mentioned a laundromat for a reason - have you owned one before? I would be pushing you firmly to explain to me how the long hours of running your own business would fit with your children? Is this realistic while they are young?

We'd also discuss the costs of childcare, the returns from a small business and whether this is right for you and your family at this time. Obviously maintenance payments from your ex would be very important here.

By this stage we would have a sheet of paper in front of us with the pros and cons of an extension and a part-time job. On the other hand, no extension and your own business and a very long debate about the reality of owning a business, while housing and caring for your kids.

You have to draw your own conclusions after setting out all the facts. But I can say one thing. In terms of risk, extending your parents' home and ensuring housing security is a huge deal.

Starting your own business is much further up the risk curve. I also expect the role and support of your parents is a critical factor.

Lots to think about. My very best wishes for the best possible outcome.

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