Just inherited $50G. How to manage this?

Hello,

I highly recommend paying off:

CC1, CC2 and CC3 - don't listen to the guys trying to talk you into leveraging with debt (this only works as long as your interest on debt is lower than ROI (google leverage effect). Don't speculate on avg. annual returns of 20+% (don't forget about the taxes on capital gains). Especially now - the business cycle is already nearly 10 years old.

The interest that is charged to you is crazy. Don't be so stupid and risk your future.

Pay off 29k. Cut your credit cards. Put 10k (cash) away and save it (for emergency/unexpected cases like sickness or new washing machine). Also if the recession hits and the stock market is down (-40% +) buy into stocks with 5k +).

Save and try to pay off the debt on your house. If necessary get another credit for the house soon (no floater, low interest rate - don't know how much banks charge in the US atm -3.75 is quite high) - Fed is raising rates as far as i know.

Never take out a loan for a car again (interest

is too high). Try to consume smart, pay with cash. And buy only what you can afford.

After you got out of debt. Always have a bit of cash in the backhand (to reinvest, safety). Take out loans only for your home (not for consumption like a tv or so - interest is always ridiculously high!!!) Build up a solid diversified stock (20-50 stocks) and bond portfolio (take care banks charge high fees that suck up your gains - manage your portfolio smart and on your own).

I hope this helps you a bit. Sry for the mistakes I am Austrian. This all comes from my experience how I would do it (work in and studied Finance).

All the best !!

OP I hate to sound like an a$$, but pay off those credit cards and cut all of them up. Don't get another one until you're responsible enough to pay them off, in full, at the end of every month.

Consolidate your credit card debt into a single one with the lowest interest rate. You'll need to shop around. Alternatively, if you can't find one that makes sense, take out a home equity loan (hopefully at 3.75% or lower) to cover your credit card debt and then pay that portion off immediately. Throw the balance of the money left over into a vanguard account that gives you a decent return on your money.

moanswers wrote:

Listen guy wrote:

Do not put a single dime of that inheritance to ANY new expenses until you pay off those three credit card balances. Use the $50k on that. You will save yourself a significant amount of money wasted on interest.

+1

Gotta go with Listen guy on this one.

Paying off debt is the #1 rule of good financial management.

Don't listen to these idiots. All in on OTM puts/calls on tech stocks, especially Tesla, Snapchat, Facebook, AMD, and Micron. Turn that 50k into 500k in 1 day!

Or like -50k margin call

OP,

first, I'm really sorry to hear about your mom. Condolences to you and your family, and I hope you all had time together at the end to reconnect and say goodbye properly.

With the inheritance, is that $50k after taxes, or will you take a hit on some kind of inheritance tax? That could make a big difference.

Anyway, the initial priorities seem obvious, Credit card debt is the worst kind of debt. Pay those off completely. I agree you should cut up one or more of them, and then you should get in the habit of paying credit card balances every month. Otherwise they slowly suck the life out of you.

Generally, house debt is "good debt" in that it's usually at a lower rate and is against a generally appreciating asset (unlike the car loan, taken out against a rapidly depreciating asset. Normally I'd say to pay the car loan next, although the rate is very low, so maybe not.

Depending on the state of your home, or your family livelihood (i.e. have you been living uncomfortably, avoiding vacations and activities for the kids, etc), I'd consider using some of the money to spend against things that have high value in improving daily comfort and enjoyment. I don't mean buying big screen TVs or other toys, but maybe someone in the family really wants to do activity X that you couldn't afford, or you really need a new kitchen set, couch or bed.

Only you and your family know your real needs and priorities, so my last advice is to talk it through with them, and make your decisions as a family (or at least as a couple), and don't lean too heavily on the "advice" you get from this garbage dump... :-)

Best of luck, and again my condolences.

Racket wrote:

moanswers wrote:

+1

Gotta go with Listen guy on this one.

Paying off debt is the #1 rule of good financial management.

Don't listen to these idiots. All in on OTM puts/calls on tech stocks, especially Tesla, Snapchat, Facebook, AMD, and Micron. Turn that 50k into 500k in 1 day!

Or like -50k margin call

Please don’t give out market advice when you work at a gas station.

banned Pete wrote:...I'd consider using some of the money to spend against things that have high value in improving daily comfort and enjoyment. I don't mean buying big screen TVs or other toys, but maybe someone in the family really wants to do activity X that you couldn't afford, or you really need a new kitchen set, couch or bed.

Other ideas, depending on your state of being:

- does the roof need replacement (now or in the near term?

- furnace? Windows?

- maybe you need a better fridge, stove, dishwasher etc (the kitchen is where most families spend a lot of time)

- landscaping?

You don't have enough money to do serious renovations (like replacing the kitchen), but some kinds of major improvements can make a big difference in the value (and comfort) of your home.

Pay off the credit cards. Put the rest in savings or use for home repairs as needed. Ditch the pet

How did you accumulate the credit card debt? It would appear you have a spending problem that $50k will only delay the inevitable, if you don't get your spending under control first. Draw up a monthly budget, figure out where you can make cuts, and make cuts until you are cash flow positive and contributing to an emergency savings account.

Then pay off the credit cards.

Your house doesn't "need" painting and new windows as much as you need to get cash flow positive. Then, you can save up for painting and new windows. Do the windows yourself to save money. You can even do the painting yourself to save money.

I would honestly cut contributions to college savings accounts, if you're still contributing to those accounts. That's a luxury anyone with credit card debt can't afford.

Step 1- pay off the CC debt

Are you cash flow positive? If not, will you be cash flow positive soon?

You have 29k left.

Max out you and your wife's IRAs (11k-13k, depending on age), if you haven't already. This can act as a super emergency emergency fund. You can withdraw the principal untaxed, you just can't use that "space" again.

Max out you and your wife's HSAs if applicable.

Use the remaining money to cover your expenses while you max out your 401(k), if you haven't already.

Same thing with your wife's, if you haven't already and there's still money leftover.

Get your budget under control. Don't carry credit card debt. If there's any leftover money I would:

a) build an emergency fund if you don't have one already. Not a "we spent too much this month" fund. You should never spend so much that you need to dip into this or carry credit card debt. If so you haven't gotten your budget under control. This is for real emergencies (medical debt, job layoffs, etc.)

b) pay down your HELOC, since you seem to have a problem with carrying debt

c) start making taxable investments. just basic s&p 500 stuff (don't try to time the market pls)

I would NOT pay down the car loan- that's cheap money.

I would NOT contribute too much to the college funds. get your own sh!t under control first.

Ally savings acct pays 1.9% interest and rate will keep increasing. Do not pay that car loan off- put the money to pay it off in a savings account and make a few bucks.

Paying off your debt would save you $4K in non-deductible after tax interest alone per year.

*Mike drop*

If it were me this is what I would do:

Pay off the cards inmediately., leaving $21k.

Put $10 in a savings account for an emergency fund.

With the remaining $11k either use for the house or to pay down some of the heloc.

person not of interet wrote:

*Mike drop*

Did we just invest some new LetsRun slang, like moran or deer Adam G? Mike drop instead of mic drop ... I like it.

Pay off the credit cards ASAP. Do you have an emergency fund in case you or your wife loses their job? If the answer is no, you might want to keep the rest for that and put it into a fund where it will earn interest with minimal risk (and have the discipline to not touch it). And I would get rid of the pet. It is a luxury item you can afford to do without.

[quote]banned Pete wrote:

OP,

first, I'm really sorry to hear about your mom. Condolences to you and your family, and I hope you all had time together at the end to reconnect and say goodbye properly.

With the inheritance, is that $50k after taxes, or will you take a hit on some kind of inheritance tax? That could make a big difference.

There would be no inheritance tax on $50k unless the inheritance was in a tax deferred account. Or unless you live in Iowa, Nebraska, Pennsylvania, Kentucky, Maryland or New Jersey. Estate taxes typically don't kick in until they exceed $1 million in certain states and $11.18 million on the federal level.

Pay off Credit card debts off ASAP.

+1 to the poster above who suggests consolidating your credit card debt

small badger wrote:

If it were me this is what I would do:

Pay off the cards inmediately., leaving $21k.

Put $10 in a savings account for an emergency fund.

With the remaining $11k either use for the house or to pay down some of the heloc.

Before you pay the cards down, negotiate or at least try.

Yes pay off those cards 1st.

If your able to say I want to pay my balance today but it is only this amount, say 10% less than whats owed.

It can work sometimes.