Ask Paul: We have debt, no assets, and will soon come into $3 million
Q. My disabled wife and I are both 45 and will receive a lump sum of $3 million from a property sale soon.
We have four kids, total debt of $55,000 at 14%pa, rent at $450 a week, and food and electricity costs of $400 a week.
Our only assets are household items and two vehicles.
Our gross incomes are $60,000 and $40,000.
We would really like to purchase our own home and have a good but steady income.
What would be the best thing to do: buy the house outright and invest the rest or invest the lot and borrow for a house?
If we invest, what would be the best way to get a good and steady income? - Chris
A. Crikey, that is a large amount, Chris!
$3 million will really set you up for life. Pretty obviously, clear out that $55,000 in debt to start with.
Then if I was in your shoes I would buy a home for cash.
People bang on about "invest and rent" and I get the technical argument that investments may return a higher amount than the cost of your mortgage, but what about the security of owning your own home?
This is your personal decision but I reckon you would be poorly advised to invest and rent.
In fact, I would be suspicious of the motives of anyone who took you down this path.
Three million dollars is a huge amount and I would protect it by buying a home, investing the rest and then building super from your employer's contributions and topping it up if you can.
With four kids, this is a wonderful chance to protect your future. I would be horrified if you took unnecessary risks.