What to do with a windfall? Advice needed!

[Irin997]

Through the generosity of my DH's parents and my grandparents (all related to family deaths), DH and I have received $30,000. DH wants to invest $25,000, and save $5,000. I want to pay off debt. What would you do?

We currently have about $20,000 in cash and liquid reserves/investments as it is.

Our debts are as follows:

Student loan #1 @ 4.38% with 18 years left - $25,051
Student loan #2 @ 5% with 15 years left - $11,750
Student loan #3 @ 1%, not sure how much longer - $2,100
Car loan @ 4.49% with 2.5 years left - $7,560

My thought was to pay off the car and SL #2 & 3.

 

[sydneysmom]

My first inclination is follow Dave Ramsey's advice...pay down your debt. Because as soon as you do, you then take the money you've been paying on the debt and put it right into savings. You're not going to get great interest in savings right now, and the % on the debt will probably be more than interest on savings.

That's what I would do... I wouldn't want it over my head while I've got money in the bank. I'd work to get rid of it as fast as possible. Good luck!!

 

[rszdtrvl]

I would also pay off debt.

 

[Irin997]

See that's exactly how I feel. But DH seems to think that if our investments can earn a return of 9-10% then we are making out ahead. BUT we want to add to our family and have me become a SAHM and I keep telling him that if we have fewer debts and payments, that will be much easier.

 

[2disneyboys]

I would also pay off the debt, snowball my regular payments into the last bit of debt. I only say this because you included info that you already have some cash reserves. The other thing I would do is find out what kind of tax impact this is going to have on me for the 2012 taxes so I could be prepared for that.

and with your wanting to become a SAHP, it makes more sense to get rid of debt before you get into investing... Investing is a long term solution..paying off debt has immediate results

 

[EMAW_KSU]

Through the generosity of my DH's parents and my grandparents (all related to family deaths), DH and I have received $30,000. DH wants to invest $25,000, and save $5,000. I want to pay off debt. What would you do?

We currently have about $20,000 in cash and liquid reserves/investments as it is.

Our debts are as follows:

Student loan #1 @ 4.38% with 18 years left - $25,051
Student loan #2 @ 5% with 15 years left - $11,750
Student loan #3 @ 1%, not sure how much longer - $2,100
Car loan @ 4.49% with 2.5 years left - $7,560

My thought was to pay off the car and SL #2 & 3.

Car, SL #2, balance to SL #1. Then take the car payment and SL
#2 payment and add it to SL #1 payment.

If you eliminate the debt that is a guaranteed return.

 

[scootch]

I would pay off debt too. Pay off the car first and keep that car for a very long time. Not having a car payment is huge. YOu can still make that car payment right to your savings account everymonth. Then when it is time for a new car, you can pay cash and never have a car payment again. That is what we do. Keep each vehicle about 9 years.

 

[dsneprincess]

I also vote debt.

 

[Irin997]

I would pay off debt too. Pay off the car first and keep that car for a very long time. Not having a car payment is huge. YOu can still make that car payment right to your savings account everymonth. Then when it is time for a new car, you can pay cash and never have a car payment again. That is what we do. Keep each vehicle about 9 years.

We have plans to keep this car for a very very long time.

 

[Ginny Favers]

I just received a similar windfall and paid off much of our debt.

 

[Irin997]

I just received a similar windfall and paid off much of our debt.

And I bet you feel really good about that too!

 

[Judique]

Do you own a home? Are you planning to buy one?

I would look at your debt differently then the previous posts. I would also have to look at it relative to your actual income.

None of it is high interest.

It is very reasonable debt for student loans and car loans. But is the debt a huge burden for you? Or is it manageable?

What your future financial plans include would be a deciding factor for me. In either case I would probably lean toward keeping most of the cash reserves and possibly paying off one debt and then adding that money into paying down another.

 

[Sandi]

See that's exactly how I feel. But DH seems to think that if our investments can earn a return of 9-10% then we are making out ahead. BUT we want to add to our family and have me become a SAHM and I keep telling him that if we have fewer debts and payments, that will be much easier.

Seriously, he is confident in a 9-10% return? I would pay down debt for sure. Also, do you own a home/pay on a mortgage?

 

[Irin997]

Do you own a home? Are you planning to buy one?

I would look at your debt differently then the previous posts. I would also have to look at it relative to your actual income.

None of it is high interest.

It is very reasonable debt for student loans and car loans. But is the debt a huge burden for you? Or is it manageable?

What your future financial plans include would be a deciding factor for me. In either case I would probably lean toward keeping most of the cash reserves and possibly paying off one debt and then adding that money into paying down another.

We bought our house 6 months ago. Our debt load is currently completely manageable right now - but we want to have kids and I want to be a SAHM. My goal is to decrease our monthly expenses so that can happen. My DH's idea of investing doesn't exactly make that happen.

 

[Irin997]

Seriously, he is confident in a 9-10% return? I would pay down debt for sure. Also, do you own a home/pay on a mortgage?

I don't know where he got that number, but yes he is. He works as a trader so he knows the markets well.

Yes, we bought our house 6 months ago.

 

[vacationer1954]

See that's exactly how I feel. But DH seems to think that if our investments can earn a return of 9-10% then we are making out ahead.

You can only get that kind of return with riskier investments. More risk more return. As a trader he knows that 9%-10% isn't guaranteed. Paying down debt is the least risky thing to do with money. All the best financial advice say to balance riskier investments with less risky investments, even a bit when you're young. Are you both taking advantage of all matching funds your employer offers through 401(k)s? If so, then use the money to pay down the debt. If you're missing out on matching funds in your 401(k), then perhaps you should use this money for that.

 

[foreUT]

How about a compromise, since no ******* in marriage is worth it, if there is a possibility to make both of you feel like your wishes were heard? Pay off student loan #2 and the car. Put the remainder (around $12k or so) towards the investments he wants to pursue. But, with those two loans gone, quickly eliminate loan #3 and then you can concentrate on #1.

Best of luck, although I am sorry that deaths were the reason for the windfalls. Just know that the deceased loved you, though, and would want this money to make your life better.

 

[SleepyatDVC]

Doesn't have to be all or nothing. Compromise.

$30,000

I would do it in thirds.

$10,000 let DH invest.
$10,000 immediate debt reduction (def. car first)
$10,000 savings (EF, next car fund, etc)

And because you bulked up your savings, I would throw everything (income) coming in toward debt reduction to get that down ASAP.

Good luck.

 

[hsmamato2]

Car, SL #2, balance to SL #1. Then take the car payment and SL
#2 payment and add it to SL #1 payment.

If you eliminate the debt that is a guaranteed return.

yes.

 

[sarahlovesmickey]

I also vote to get rid of debt and take the payments you were making towards the paid off debt and apply them to the other debt to get them paid off faster. =) Good luck!