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Monday, March 4, 2024

How to Spend Your Stock Market Profits to Live Your Best Life

With stocks nearing record highs again, it’s a good idea to find ways to spend some of your stock market gains. There’s no point or inherent joy in owning stocks (unless you’re a money lover yourself), so we have to sell occasionally to reap the benefits.

When I first started investing in stocks in 1996, my freshman year of college, I invested for the sake of ‘become rich.” Then I changed my goal to learn as much as I could about the stock market and get a job in finance.

Over time, the goal of “getting rich” with stocks became meaningless. Instead, my investing goals became very specific after losing a lot of money in stocks between 2000 and 2003 and again between 2008 and 2010.

The losses reminded me of the importance of selling shares once you’ve earned enough to buy what you want. Do you know what you are saving and investing for?

The best way to spend your stock market profits

It’s great to celebrate the good times, especially after a bear market. Here are eleven ways to spend your stock market gains in no particular order. I’d love to hear more ideas from you.

1) Fertility treatments

If you don’t have a child and want one, you may want to sell some stock to pay for egg freezing IVF treatments. Insurance usually does not cover these expensive treatments.

On average, the cost of egg freezing can range from $10,000 to $15,000 per cycle. More than one cycle may be required, making the total cost approximately $40,000 or more.

IVF can cost between $15,000 – $40,000 per cycle depending on where you live. Unfortunately, there are no guarantees that a mother will become pregnant and remain pregnant after each treatment. That is why the costs of fertility treatments can increase considerably.

The younger you start, the better your chances and the more you potentially save.

2) Your child’s college education.

Figuring out how to pay for college is one thing a major stress factor for many parents. Despite rising tuition costs, you can’t expect kids to make pragmatic choices about higher education or be brilliant enough to land rare full scholarships. As a result, parents often stay unhappy in a job they hate for longer than they would like in order to finance their children’s education.

Why not use some of your stock market gains to take some of the stress out of college tuition? When it’s time for your child to go to college, use your… 529 plan, Roth IRA, or UTMA to pay for their college education. It matters less what the balance is on these education accounts.

You have to spend when it’s time to spend because getting a degree isn’t an endless effort. Trying to book future profits into your education accounts once tuition comes due is futile. This is the moment you’ve been waiting for.

3) A house you will live in for more than 5 years

Taking stock market profits and converting them into a house is by far my favorite choice. Every day we spend twelve hours or more at home. Those who work from home easily spend 20 hours or more at home on average. As a result, our home is a primary consumption.

Unlike selling stocks to pay for something that no longer yields potential returns, a house does. Selling stocks to buy a house is simply a transfer of assets from a more volatile asset to a generally less volatile asset.

Real estate has also increased in value over time, just not as much. As a result, depending on the amount of leverage you use to purchase a home, your net worth won’t lag as far behind as it would if you stayed invested in the stock market.

Because most people take out a mortgage while also having greater absolute dollar exposure to a home, most people will building more wealth through real estate then through shares.

Being able to make more money in real estate than in stocks, experience less volatility, and enjoy your home is a triple win.

Returns by investment category - Compare real estate and bonds

4) Renovate your house

If you don’t want to move, you may want to leverage your stock market gains renovation. Make investments to improve your home, such as renovating the kitchen and bathroom or finishing the basement. This usually also increases the value of your home.

The lowest hanging fruit is changing the fixtures in your home: doorknobs, faucets, lighting and window treatments. They are relatively easy and cheap to do. The next simple renovation is to install Toto washlets. They will change your life for the better. Also consider buying a new dishwasher and washer and dryer.

If you are over 45 years old, I not recommend that you perform a complete bowel reconstruction. Maybe renovate a bathroom and a kitchen one by one. But it may not be worth going through an entire intestine because of the amount of stress and time involved.

5) A midlife crisis car

Stock market gains are similar funny money winnings. You don’t do anything to make money. You don’t do anything to lose money. As a result, sometimes it’s fun to turn funny money into splurges you don’t need. And something like that is one midlife crisis car.

My Range Rover Sport will be ten years old in 2025. As a result, I’m starting to research what our next family car should be. I like the look of the redesigned Range Rover. It’s also bigger than the Sport, which works well as my kids get older.

However, I also just bought a house with a Tesla charge. By 2025, even more car brands will have adopted the use of the Tesla charging system. That’s why I’m leaning toward finally purchasing an electric vehicle.

It will be fun to test all the options, such as the Cybertruck. Perhaps a Range Rover EV will be the final choice. But I’m always on my guard when I… first or second year model after a redesign because of all the bugs.

Source: CNET

6) A sports/health club

Mental and physical health are more important than money. So if you have profits in the stock market, you might as well use some of them to join one private sports club.

You can play sports, play sports and make friends. If you feeling lonelier than usual. Joining a sports club can do wonders.

In February 2023, I joined a club to play tennis and pickleball indoors during the rainy season. I am less happy and moodier when I don’t exercise. The extra $185/month was well worth it.

7) To charity through a donor-advised fund

Consider donating some of your stock market profits to charity through a donor-advised fund. The recipient gets the full appreciated value of the shares and you don’t have to pay any capital gains.

If we are lucky enough to make money by doing nothing in the stock market, we should share our good fortune.

8) Pay off annoying debts

Pay off any outstanding debts, such as high-interest credit cards, car loans, or student loans. This is like giving yourself a guaranteed return equal to the interest rate, freeing up cash flow.

For example, even if the interest on your debt is 0%, such as if you got an interest-free loan from your parents, paying off the debt feels great. The less money you owe to people or institutions, the freer you will feel.

I have never regretted paying off a mortgage, even though I could have made more money elsewhere. Each time it felt like a huge win, considering the average term of each mortgage was 15 years.

When you’re young, you may enjoy taking on debt Boost your net worth. When you are older, you may enjoy paying off your debts to feel more secure.

9) A new beautiful wardrobe

As someone who likes to wear cheap, comfortable workout clothes, owning a nice wardrobe is foreign to me. I have the same suits, shirts and pants that I bought in 2000 in my closet. So if you want to find a way to save money on clothes, remain the same size as long as possible.

But now that I’m hanging out with other parents more often because of my kids’ school events, I should probably buy some new clothes.

Well-tailored clothing ensures that you leave a good first impression. In addition to buying clothes that fit well, you can also consider accessorizing with jewelry and accessories luxury watches. For those who love luxury watches, you will be happy to know that the prices of luxury watches have fallen since the beginning of 2022.

price index luxury watches

10) Your loving parents

If your parents are still around, it’s worth spending some of your stock profits on them. Being a parent is the hardest job in the world for the first 18 years. But we tend to take our parents for granted over time, especially if we aren’t parents.

Wouldn’t it be nice to send your parents on a fun cruise? Or how about a two-week holiday to Paris and Italy? For parents who are extra frugal, spending money is a great way to get them to change their financial habits.

Enabling our parents to live out their golden years is something we will never regret. They won’t do that either. I’ve been trying to get my parents to travel now that COVID is over. However, it was more difficult than expected.

Perhaps the ultimate: About freedom to do what you want

If your stock market windfalls are significant enough, you may finally feel encouraged to do so negotiate a severance package and say goodbye to work forever.

Take your total profit and divide it by your annual cost of living to determine if you have enough sustainability. If your stock can sustain you until the average life expectancy, you’re ready to escape the corporate grind.

Realistically, amassing the funds to sustain you decades into the future may be overkill. You really only need your investments to bridge the gap until age 70, when this is maximum Social Security Benefits kick in.

At 59.5 you also get penalty-free access to 401k/IRA savings. You may also have others sources of passive income streams that you have developed can also support you.

Having the freedom to retire early thanks to runaway stock market success can be the ultimate prize. When work becomes optional, you tend to focus solely on passions – creativity that isn’t burdened by what pays the bills.

Here’s to more stock market gains in the future

After the discouraging stock market losses in 2022, we should enjoy our current gains – who knows what their staying power will be in an unknown future. Instead of endlessly chasing more or worrying about the ups and downs, let’s appreciate the windfalls when they happen.

Distribution of S&P 500 Annual Total Returns from 1957 - 2023

Taking chips off the table every now and then to fund lifestyle desires maximizes the purpose of investing. Here we go to celebrate the win!

How do you spend your stock market profits? The more ideas, the merrier.

Frequently Asked Questions – FAQs

How can I use stock market profits for fertility treatments?

Consider selling stocks to fund expensive fertility treatments, as insurance often doesn’t cover these procedures.

Is investing in a midlife crisis car a wise use of stock gains?

While not essential, using stock market profits for a splurge like a midlife crisis car can be a fun and personal choice.

Can I donate stock market profits to charity without paying capital gains?

Yes, using a donor-advised fund allows you to donate stock profits, and the recipient receives the full appreciated value without capital gains tax.

How can I enhance mental and physical health with stock market gains?

Allocate some profits to join a private sports club, promoting both mental and physical well-being.

Is paying off debts a wise strategy with stock market profits?

Paying off debts, including high-interest ones, is a smart move, providing a guaranteed return equal to the interest rate.

Can stock market profits be used for early retirement?

Significant profits may empower you to negotiate a severance package and consider early retirement, focusing on passions and life enjoyment.

Sources & Idea Inspirations:

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