unexpected windfall....

[jfoofj]

So, my grandfather passed away in January... he was 89 and had a great life. He left my gram (who misses him horribly...), six children, 11 grandchildren, and 9 great-grandchildren. Today I got a card in the mail from my gram with a check for $5000.00 in it, "from Grandpa". I am shocked. Totally shocked. While I would consider my grandparents to be well off (he was very successful in his career, they have 2 homes, etc), I never in any way, shape, or form expected any money from him. I didn't really even think about it much, but I guess I figured my gram would get everything, then maybe when she passes spread any money to her children. Especially with so many children and grandchildren, I just never expected anything like this!

I am still trying to digest what to do with this check. I'm going to deposit it tomorrow and think about it for a few days. I am just looking for some input from some budget minded people. We have a $280,000 mortage on our home (which we bought for $399,000 in 2005... I don't even want to think about what it is worth now... but we have no intentions of moving anytime soon, good interest rate on mortgage). DH and I have some debt on credit cards, but it was transferred to a 3.9% interest till it is paid off (approx $8000 from re-doing our floors throughout the house/work in kitchen). We don't have a great "cushion" savings account... I have been trying to hard to pay down debt (finally got the student loans paid off, and DH had assumed $26,000 in debt from his divorce in 2002, all paid off) that we only have a couple thousand in an emergency fund. We both contribute to our retirements, and are on track with that, but the kids don't have much in the way of college funds (but due to DH's job they can get free tuition to any MA state university... an option...). We each owe on our trucks... too much... I owe $12,000 and DH owes $10,000, trucks are newer, in good shape, with extended warranties, good interest rates on the loans. We also have a loan on a boat, but is is a 12 year loan and the interest is low and the payment is approx $100.00/month. I have about $600 in a vacation fund too, that I deposit $50/week to, we are planning on going on a cruise next year.

I just got my tax refund, and used half to pay down debt, and with the other half bought a new mattress and couch (both which we were in desperate need of!)

Any advice (aside from calling Gram to say thank you, all over that!) would be appreciated!

ETA........ ugh, after re-reading this I feel like I have SO much debt! That is why I have hardly any savings, I just keep trying to pay stuff off! DH and I have good jobs, pretty secure, and make approx $112,000/year combined, and we have a plan to have at least our credit card debt paid off this year. We are not HUGE spenders, but we aren't coupon cutters either (but I'm trying). We go out to eat, to the movies, one "big" vacation every other year, spend too much on birthdays/christmas, but my goal is to be debt free (other than house) which I feel like we should be able to do with the money we make.

 

[ceecee]

Call Gram first thing! Then I would put it in your emergency fund.

 

[Ning Ning]

What a wonderful gift from your grandparents! Before you use this money to pay bills or anything like that, why not consider buying something to remember your grandfather by - a piece of jewelry or something like that? That way, whenever you wore it or looked at it, you would remember him and smile.

I received a small inheritance from my daddy's only sister last year and and spent half of it on something I will always remember her by - a new outside air conditioning unit! Well, it's not glamorous, but I can't help but think that she "knew" I would be needing a new one!

 

[runwad]

Another vote for the emergency fund

 

[DVCBELLE]

As long as your emergency fund is at least $1000 - Pay off your smallest debts. I would definitely work on a snowball debt if I were you. If you have some money in savings then I would go ahead and pay off your credit cards. Credit card debt is not a good thing right now if you lose your jobs - they will be the most relentess in collecting from you.

 

[donnajean17]

On one hand my instinct says you should use to pay off some of the debt (it will help you sleep easier at night!) and that seems the smart thing to do if you really want to try and be debt free this year .... but on the other hand, it was an unexpected windfall and I am sure your grandfther intented for you to do something with it that you would enjoy... so it's tough. Maybe use 1/2 on the debt and do somethign fun with other half? Like take a vacation or something? Just a thought.... good luck!

 

[jfoofj]

My gut is telling me emergency fund too. It is just so tempting to whack my credit card debt with it. I keep saying that because we have pretty good job security and good incomes that we don't have to worry about an emergency fund as much, but realistically anything can happen. We do both have disabiltiy insurance, and life insurance too. I just hate having debt, but obviously not as much as I like having new floors, newer vehicles, and a mattress and couch that dont hurt my back or have torn cushions.

I watched my former MIL save and save and save and save, saying she would buy this or that, take that trip, splurge when she retired. She retired and died 6 months later. While I want to have financial security, I also want to enjoy my money now too. I guess I'm just trying to balance it.

 

[ryanshana]

I vote emergency fund.

Maybe also take a small amount (a couple hundred) and do something w/ your family that your grandfather would have like to enjoy w/ you or known that you did.

 

[wdwfan16]

I would put in in your EF.

 

[jfoofj]

I appreciate everyone's input......

I am NOT a jewelry person... I rarely wear more than my wedding rings and silver earrings, so while I love the idea of buying something to remember him by, it would really just stress me out knowing I spent a lot on jewelry. Same for a vacation. Don't get me wrong, I LOVE to vacation, but I need to do it systematically, saving up for it, or it just feels wrong. Weird, I know.

I guess I am teetering between paying down debt, and emergency fund. Maybe half each? I think I am going to put it in my savings, and vow to wait a month and see how I feel then... if having that money in my savings makes me feel secure, I'll keep it, and if my debt is stressing me out, I'll pay that.

 

[smkiya]

I would use it to pay off debt, smallest to largest.

 

[jfoofj]

I would use it to pay off debt, smallest to largest.

Is that the Dave Ramsey plan? I hate to admit it, but I have never really read any financial guru's plans.... I really should, I just worry that I will follow the WRONG plan, so I just do my own thing.

 

[SeansMom]

Why not buy yourself a solid piece of furniture, like a hutch, or a really nice piece of jewlery with part of it, and then put the rest in an emergency fund. That way, you have a nice reminder of your grandpa AND some security.

Either way, I'm sorry to hear about your loss.

 

[iwrbnd]

I would pay off debt. You could always remember that your grandpa helped you pay off your truck or whatever. In an emergency fund it will dwindle down until you don't know what he contributed to. Just my 2 cents.

 

[DVCBELLE]

That is the Dave Ramsey plan - my household income is close to yours and I used to wonder why we didn't have more money than we did. I started following his plan - and now we are in awesome shape!

I don't know anyone who ever followed Dave Ramsey's plan and ended up in worse financial shape! You may decide it isn't for you but I would give it a try!!

 

[ceecee]

You don't need something tangible to remember a loved one, save the $. What do you think he would have done at your age? He didn't get to where he was by spending a lot of $ and debt. Ask your Gram for advise? Put it in a savings acct during your grieving process and make the decision when your mind is clear. Sorry for your loss!

 

[princessbride6205]

I appreciate everyone's input......

I am NOT a jewelry person... I rarely wear more than my wedding rings and silver earrings, so while I love the idea of buying something to remember him by, it would really just stress me out knowing I spent a lot on jewelry. Same for a vacation. Don't get me wrong, I LOVE to vacation, but I need to do it systematically, saving up for it, or it just feels wrong. Weird, I know.

I guess I am teetering between paying down debt, and emergency fund. Maybe half each? I think I am going to put it in my savings, and vow to wait a month and see how I feel then... if having that money in my savings makes me feel secure, I'll keep it, and if my debt is stressing me out, I'll pay that.

That sounds great - you can always change your mind about what to do with the money later if you haven't already spent it! I too like my money to multi-task, so when we end up with some extra for whatever reason, I pay extra on debt, up our savings, and put some towards the vacation fund.
I know there have been other suggestions of doing something more "fun" with the money. Is there something you could do with a small amount of the money - like a family membership to the local zoo or science museum? You could make some new memories, funded by grandpa. Or something for your home. Maybe there is something you've been meaning to purchase, but keep putting off? I know for me, we keep looking at artwork to hang above our couch, but never want to spend the money when we find something. Again, just something like 10% or less of the total, then you can save or pay down debt with the rest as you've planned. Of course, there's nothing wrong with saving it all - just trying to give some more ideas.

 

[Disney-Kim]

Since all your debts are bigger than your windfall...I would say just save it. Use it down the road for something you really need or even some towards your vacation.

 

[bumbershoot]

My gut is telling me emergency fund too. It is just so tempting to whack my credit card debt with it. I keep saying that because we have pretty good job security and good incomes that we don't have to worry about an emergency fund as much, but realistically anything can happen. We do both have disabiltiy insurance, and life insurance too. I just hate having debt, but obviously not as much as I like having new floors, newer vehicles, and a mattress and couch that dont hurt my back or have torn cushions.

You said it..you hate having debt.

Since your jobs seem secure but you have all that nasty debt, I would get comfy with the few K you have in your emergency fund, and throw that lovely gift at the debt.

Is that the Dave Ramsey plan? I hate to admit it, but I have never really read any financial guru's plans.... I really should, I just worry that I will follow the WRONG plan, so I just do my own thing.

Yes. If you don't want to deal with the "guru" nonsense, I'd go to livinglikenooneelse.com (llnoe.com) and join up. It's the Ramsey system, but talked about by non-guru-type people.

First you get current with everything, then most just keep 1K as emergency fund (enough for most true emergencies, not enough that you feel comfy with it), then list all your debts, lowest to highest. Don't pay attention to interest (though that's easy for me to say, as our highest interest was our lowest debt). Pay off the first debt, take the amount you were sending to that debt and put it towards the second. ONce the second is paid, take the money you were putting towards the second (its minimum and what you were sending at debt 1) towards the third. As you finish up the debts, it becomes a snowball, getting bigger and bigger as it goes down the hill!

And there are other things down the road (for instance, it is recommended to STOP contributing to retirement and college funds, b/c what's the point of that, if you still have debt, and the interest those are going to earn is nothing compared to the interest most loans and CCs charge...and you take that money and throw it at the debt as well), not just that.

 

[PinballFamily]

What a generous grandmother. To make gifts like this while still freshly grieving must mean a lot to her. Please don't *just* call - sit down, collect your thoughts and memories of your grandfather and write her a heartfelt note of thanks and gratitude. It will mean a lot to her - just as the gift has meant a lot to you.

The cash will certainly help you - as cash - but perhaps also is already helping you by your work to itemize and get a better handle on your debt. This is perhaps the most valuable part of this gift. You need to be in a more secure place regarding your finances - for yourself, your future retirement, and your kids. Knocking out your debt and increasing your savings methodically and responsibly will be the best possible honor to your grandfather and grandmother's generosity.

(FWIW, I hope you are right about your kids' future tuition. What we found out was that the state "gives" eligible students the "tuition" but not the "fees." Depending, of course, upon the state school/program, MA state college "tuition" is currently about $1,000 a year. "Fees" are about $15,000 a year. Not counting room/board expenses...)

Thanks for sharing the news about your windfall! Good luck with your decisions. Raise a toast to your lovely grandparents!