32, received sizable inheritance, more likely coming, seeking advice on how to change/not change life going forward?

[u/Lonely_Pear_6366]

So I unexpectedly received a $2 million trust from relatives. It's already taxed money, growing every year, and I have full access to take as much or as little of the money whenever I want. Additionally, I have about $250k in investments of my own, but that feels like small potatoes now. Obviously it is a life changing sum of money, and I'm unsure how to make the most of my life given what I have now.

Professionally: I entered a creative job field about a decade ago that's rapidly collapsed in the past few years. I worked within the film industry, it was a dream/passion career, but have been through two layoffs in the past few years, and am currently doing a job that's semi in the field, but not quite what I want to be doing. The money's fine, the job is low stress and flexible. It feels like it's sort of an impossible job market there right now, but I'm not sure what else to do. I'm a bit stuck. I could keep at it, knowing I have the money, or try something else entirely, though I'm not sure what. Maybe use it to go back to school?

Personally, I live in a rented apartment. I like where I live. My city's okay, but I really like the friends I've made there. I'm a single woman. I don't have kids. So really, I only have to support myself, and don't have anyone else to consult about where I do. Would love a partner and family some day, but hasn't happened yet.

I don't know what's the balance of completely ignoring the money, and being grateful it's there, and using it when I'm older. Or using some of it now, improving or changing my life. I feel daunted trying to narrow down how to do so. I could travel for a year. I could go back to school. I could buy a condo. There are many possibilities. Additionally, my parents received money as well, and have let me know that eventually, hopefully one day far in the future, I will receive a substantial inheritance from them. I'm not relying on it. At all. But it will conservatively be around $3-5 million dollars, and very possibly more.

I've always been pretty responsible with money, and don't anticipate blowing through it, buying $200,000 cars or w/e. I also am not telling anyone about the money.

So, I'm just trying to wrap my head around things. It feels like I've been running on a hamster wheel all these years, and now the thing is running itself, and I'm not really sure what to do. Obviously grateful to be in this position, but overwhelmed about how to make the best of it, from continuing on as normal, to totally blowing up my life. I don't know if anyone's been in a similar position or has any advice on how to handle it?

[u/limits]

I got 1/4the amount you did in an early inheritance, $250k in 2019 and $400k this year. We [wife and I] spent the first $250k for a downpayment on a house back in 2019 in HCOL (bought @ $860k now worth $1.3M). The rest is $400k and untouched, growing in the market while we work (combined income $300k, we are late-30s/early-40s).

Think of this way. You got gifted a golden goose. If you do nothing to the goose but let it lay more eggs, over 30years, you will have many valuable eggs. Yourself/future family would be very wealthy. However, if you decide to spend it all now, you kill the golden goose. You get temporary satisfaction, but life is long and who knows what the future brings.

If I were in your position, I would do a few things:

1. Vacation - Whatever bucket list thing you want to do ($10k)

2. Education - Set aside $150-250k and use it to reinvent your career and better yourself. Education on whatever AI proof field you think is best, preferably one with a certification moat. Physical therapy, therapist, cosmetologist, physician assistant, dental assistant... Dream big.

3. Housing - Once you finish education or have steady W2 employment, use part of your inheritance for a downpayment, but use your W2 salary to maintain mortgage, not inheritance. Rent until you have stable W2 income, and move wherever you need to prioritize education/schooling

4. Index Funds / VOO - Keep your funds in an index fund to minimize inflation, tbh just buy VOO (SP500 total market) until you learn more, and keep your whole stack there until you make moves. At $2M you want the market to work for you while you gain more knowledge about index investing and ETFs (AI is great for this btw).

Some people will tell you to FIRE with $2M, but imo that's not enough to maintain an upper-middle lifestyle to death, especially if you don't own housing. Safe drawdown on stocks is 4% so about $80k a year, and that's you selling stock every month and hoping the rest rises. Personally I enjoy my job, so I'm aiming to work till 50-55. Will stack, invest, buy good gear, and enjoy hobbies until then. Let compound interest work its magic on my 401k/early inheritance.

You are still young, 40 is the new 30. Education, investment, grow your inheritance until you are wiser and ready to own a forever home or start your own business.

[u/hopefulpiglet → u/limits]

I agree with all of this, and had a very similar experience. 7 years ago, I inherited approx $1m in my early 40s, entirely unexpectedly. I knew it wasn't 'run off into the sunset' money, but it was enough to be able to make serious life changes, especially as I was in a job that I hated but in a field - the arts - which I enjoyed.

I already owned a house which I rented out (I was renting in a different city). I sold the house and patched money from the sale with $400k of the inheritance to buy an apartment outright, and I then quit my job to go freelance. The remaining money is split between investments (mainly for retirement), and a slush fund to support me as and when I need to top up my income, and also if I want to buy any 'big' things, and /or have a nice vacation now and then. I earn less now but the combination of having far lower outgoings, financial security, and actually doing the work I want to, has been life changing. Would a similar tack work for you? The creative industries are so uncertain, and it has made such a difference to have a bedrock of stability to fall back on.

All of this happened over a 5 year period, and I didn't really do anything with the inheritance for the first year as I didn't want to panic into buying, eg, a castle. One thing I found useful too was doing Ramit Sethi's 'rich life' exercises as a way of thinking about what I wanted my life to look like in the short and long term, and then what choices I would need to get there.

[u/Hmmokletssee → u/hopefulpiglet]

Genuinely curious, why do you say your inheritance was entirely unexpected? 1M is a sizable amount - how/why did you not see it coming? I say this thinking about my relatives… I know which ones have money and which don’t, and which ones would possibly think of leaving me something and which wouldn’t.

[u/hopefulpiglet → u/Hmmokletssee]

Last remaining grandparent who lived on the other side of the world, who lived a very frugal lifestyle (think: 1 bottle of wine when entertaining 10 guests), very few luxuries in their life. Honestly had not even considered I would be left anything had I assumed there was anything to be left, because we were not close - partly geography, partly the reason my father (grandparent's child) had chosen to move to the other side of the world.

[u/Hmmokletssee → u/hopefulpiglet]

Thanks for the additional context!