Ask Paul: I make $18k a year and just inherited $150k

I inherited $150,000 from my dad and don't know what would be the best way to invest it.

I'm 58 years old and have been a stay-at-home mum to four children until two years ago when I started with a department store as a casual. I probably earn around $18,000 a year and have $2000 in super so far. 

I recently separated from my husband and am living with my adult son in a rental unit.

As my weekly wage isn't consistent, and some weeks it's less than in others, I find myself dipping into my inheritance when I have bigger payments like rent. 

I would like to be able to work for at least another 10 years and would like to have some sort of nest egg. Any tips, please? - Jacqueline

That is a wonderful legacy from your dad, Jacqueline.

Life is expensive and I am not surprised you are dipping into your pot of money from time to time.

I'm sure you have done a budget, but the first step is only to draw on that money in a planned fashion. Dipping into it as needed is sure to see it disappear.

This is very dependent on your health and personal situation, but one solution to protect your capital is to consider working some more hours and using your income to cover expenses. If that is not possible, then I'd love you to have a yearly budget with planned drawdowns from your capital.

This could also allow you to invest for the longer term. An example may help. Let's say you needed an extra $5000 a year from your capital. Leaving, say, $30,000 in your bank account would cover that for many years and allow you to invest around $120,000 for the longer term.

A low-cost income-style fund is something you could consider for all or part of the $120,000. An income fund is a mix of investments. Returns depend on the mix of assets and level of risk.

Many professional managers such as Perpetual offer these. A low-cost example is the Vanguard Conservative Index Fund. Its annual fee is 0.29%, which is very low indeed. Its annual returns have averaged a bit over 6% for the past 10 years.

You should do your own research and if in doubt seek personal advice, but my thinking is that if you were earning around 4% or 5% on around $100,000, it would give you a really good chance of protecting your capital into the future.

I think a bit of research and a couple of phone calls to managers such as Vanguard would help you here.

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