My fiancé is inheriting 5.2 million dollars. What should we do to ensure that we never have to “work” again?

This question and answer originally appeared at Quora.

We are stressed to the absolute max, and overwhelmed beyond comprehension. What do we do to secure an 10k–12k++++ monthly net income and fix our horrible Credit While still getting a house, dream cars, and helping out our families? Business ideas? Franchises? We’re lost at 22 and 24 years old. HELP!

(I’m making the assumption that this is US dollars when discussing your wealth.)

Firstly you should try and relax.

Having the perceived problem of too much money is far better than the very REAL PROBLEM of too little.

I understand the vast amount of options, informations and decisions you will face can be overwhelming – but they will only be so if you try and make all the decisions at once and don’t take your time.

Just be patient and let the wealth you have received sink in – get a little used to it before making your decisions.

Forget about your horrible credit rating – you should never have to borrow money ever again. Make sure you clear any outstanding debts as soon as possible, but make sure you look at all the details and don’t incur early repayment penalties etc.

Before thinking about all the lifestyle assets and purchases you would like, you should consider properly arranging investment and business assets.

At the age of 22/24 you should still think about a business/career/projects etc. You can choose these purely based on enjoyment and interest and use your capital to top up your income to your needed expenditure level.

Before you go putting lots of your capital into your dream property and cars – I would suggest you rent them for a year. After that year you can decide whether they still remain your dream choices – I would be surprised if the allure doesn’t wear off a little.

You should think about investing at least half of your wealth into a sensibly constructed and patient investment portfolio. You have enough wealth; there is no need for you to chase more and risk losing your shirt. All you need to do is maintain your wealth against inflation, taxes, poor investments, overconsumption etc. (that is actually no mean feat).

At all times remember to diversify (across companies, across asset classes, across investment managers and tax structures, across institutions, across banks, across countries, across professional assistance).

If you do this with $2.5million, you can reasonably expect to withdraw $100,000 pa (using the rule of thumb of 4%). You have to be careful here as investment yields are generally quite low at the present time and you will have a very long life. I also haven’t mentioned taxes which will be largely dependant on where you intend to reside and how you structure your affairs.

When deciding how to help your family, be very careful about how you help them. Make sure it is constructive help and consider regular gifting rather than lump sums – perhaps set aside some capital into trust and use the returns from investing to help your family meet study costs, or start businesses etc.

Take some time to learn about personal finance, your behaviour and investing. Education is what will protect you from making too many errors with your money.

Take you time to find the right professionals who will sit on your side of the table and genuinely help you. You should interview a number of people before making any decisions about this.

Finally, whilst other professionals can provide input in many ways, it is ultimately your own money and therefore it’s important for you to remain in the driving seat and truly understand the decisions you need to make.

I wish you luck and I hope you have found these comments helpful.

This answer first appeared here.

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Mark Underdown

Financial Planner, Small Acorn Money

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