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Ask Paul: We have debt, no assets, and will soon come into $3 million

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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.

ask paul million franking credits

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.

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Paul Clitheroe AM is a respected financial adviser and Money's chairman and chief commentator. He is chair of the Australian Government Financial Literacy Board, and author of several personal finance books. Got a money question? Ask Paul.
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