Ask Paul: We sold our house to move to the country, now we have $2 million

Dear Paul,

Our family is moving from a growth area to a regional city, so we've sold our first home. After the mortgage is discharged and various fees paid, we're looking at more than $2 million arriving in our bank account.

We have no experience with an amount like that! 

We will need another home in the cheaper area, my wife's super needs a boost and we need to pay off $35,000 for two cars.

In our early 40s, where do we even begin with deciding how to use those funds wisely? - Adam

Wow, not too many 40-year-olds see $2 million in their bank account in their lifetime, Adam.

What a moment it will be for your family when you see cleared funds! The key advice here is not to rush. Thanks to rising rates, you will get decent interest in a very safe term deposit while you plan.

I'd certainly pay out the cars, and any boost to your or your wife's super is great, as long as you don't need that money for decades.

But it is housing that would be occupying my mind. Rising rates will take the heat out of the market, in particular in our big cities.

Regional areas with continued population growth will remain strong. I would not be in any panic to buy, but this is clearly the first decision. It all depends where you move to and the type of home you want, but I'd focus on that decision.

Once you buy a new home, that obviously determines what you have left to invest. I doubt you are making this move to spend the $2 million proceeds on a home, so let's say you spend $1 million. From here the principles are the same, whether you have $500,000 left over, $1 million or $1.5 million.

Depending upon your taxable income and family income requirements, maxing out your super through salary sacrifice makes a lot of sense, even if you spend a bit of your capital to do so.

Only 15% tax on money going into super through salary sacrifice is a terrific wealth builder. Yes, it is well worth checking out adding to your wife's super.

Once a home is bought, debts are gone and super used to best advantage, then it is actually a pretty simple investment discussion. A lot of this depends on your preferences and attitude to risk.

You could buy a sensibly geared investment property and start an investment portfolio. This can be as complex or simple as you like.

You could run your own share portfolio or, if you are like me and you like the long-term returns from shares but do not like managing them, these days it is so easy to use a few ETFs or go to one of the many very low-cost managers, such as Vanguard or BlackRock. Any of these give you diversified investments at a minute cost.

My advice is to sort out the key issue - a home you love - then start to research your investment options, be they DIY share or property or through a manager. Don't hesitate to seek professional advice if that helps.

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