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My girlfriend has come into a fairly large amount of money after the unfortunate death of her mother. I for one do not make a great wage(16.15 p/h) and she makes around $43,000 a year. So we have been looking around and I know that there are legit places she can go to ask about these things, however, we would like to start here. I've scanned a couple of the threads here and seen great advice but I would like to know if there is anything else you can add with a personal touch. Current Expenses for her: No Interest: RTG (furniture): 1922.80 Interest: Discover:1275.52 (22.99%) Buckle:488.61 (24.99%) Bank:2117.62 (14.24%) Car:12391.15 (10.9% at 290 a month) Student Loans: 10110.63(5.6%) 14029.01(6.8%) 6742.58(6.8%) College:485.74 (5%) We have a budget in place for our everyday expenses, rent ect. She's just not sure if she should tackle any of these debts first, kick student loan first, or throw some money or all of it into investments and pay this back later. Unless you need more detail on personal expenses she really wants to know, should she invest or pay these off. Just typing this makes me cringe because she's a hard worker and had to take on a lot by herself due to family issues. Please goons, give us some sound advice. Thank you for the incoming help in advance. UPDATE: She took all the advice given. Last thing she needs is to set up an emergency fund, thank you for the replies! Deception fucked around with this message at 14:51 on Sep 27, 2014 |
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Sep 25, 2014 19:01
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| # ? Apr 23, 2024 22:39 |
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Wipe out the Discover, Buckle, and "Bank" loans immediately. Those interest rates are way higher than what you would expect to receive from the stock market. This is $3,883. I'm guessing from all the debt that she has no emergency fund. Figure out how much cash she would need to survive for 6 months and put it in an online savings account (Discover is great). I'll estimate 6 x $1,500 = $9,000. That's a total of $12,883, leaving her with $14,117. I don't know how to advise her on what to do with this because I am unsure what sort of short term savings goals she has. I'm guessing she needs to work on budgeting. Her car loan indicates she bought too expensive a car.
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Sep 25, 2014 19:07
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Paying off her highest-interest debt for sure, she's looking at an instant guaranteed 11-25% return, no investment can match that. If she has no savings (which I'm guessing she does not, given the credit card debt), I would probably split the remaining 11 grand between paying off some of the 6.8% student loans and establishing an emergency fund. But more important than any of that is learning to budget and not live beyond your means, and that includes not giving money you don't really have to family. Without that, the windfall will do nothing in the long run to improve her financial situation.
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Sep 25, 2014 19:09
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I agree with most of the suggestions coming in. I just think she needed an outsider to tell her this instead of me nagging. Thanks a lot for the quick responses we will be following this thread and keep you all updated. Another question, should this money be put into the bank or cashed. What's the best way to avoid a ridiculous tax? Deception fucked around with this message at 19:13 on Sep 25, 2014 |
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Sep 25, 2014 19:10
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The first ~5 million of an inheritance is not taxed:quote:If an asset is left to a spouse or a Federally recognized charity, the tax usually does not apply. In addition, up to a certain amount varying year by year, amounting to $5,250,000 for estates of persons dying in 2013[2] and $5,340,000 for estates of persons dying in 2014[3] can be given by an individual, before and/or upon their death, without incurring federal gift or estate taxes.[4]
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Sep 25, 2014 19:15
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Cicero posted:The first ~5 million of an inheritance is not taxed: For some reason I thought throwing 10k or more into a bank, would incur a tax. Thank you for stating the obvious in the wiki I should have looked up ha, that's a sigh of relief.
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Sep 25, 2014 19:18
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27K isn't a lot of money in the grand scheme of things. Investing it at this point in your life isn't the smart move in my opinion. I'm going to assume you're under the ages of 35. First thing she should do is put 5,000 dollars away for an emergency fund. I keep mine at a separate bank from my normal checking/savings account. It's there for emergencies only. 22K left Secondly, pay off all that high interest debt. 25% interest for a Buckle store card? Good grief. You never carry a balance on those high APR store cards. 3900 dollars will pay off Discover, Buckle, and the Bank. 18.1K left Third: Pay off RTG. I don't care if this is low/no interest. Judging from the interest rates on the borrowed money your g/f doesn't have very good/excellent credit. Just go ahead and get out from under this. It's probably 'deferred' interest and if it doesn't get paid on time, or you miss a payment you're gonna get hosed on this. 16.1K left 11% APR on a vehicle note in today's economy is terrible. My last few vehicles have all been 2.9% or less. I would say pay this off completely or put a chunk of cash down and refinance at a lower interest rate. I would suggest taking up to 10% of the money and spending it on whatever she wants. Maybe her mom had a favorite vacation destination. Take some time off and go visit it. Try to make some positive memories with some of the money. I don't really worry about student loans that much, paying off the small College note would be a good idea just to deal with one less bill every month. Other than that, make sure your budget is solid, between the two of you, your household brings home an annual income of over 76,000 dollars a year. You should have no issues with that kind of income if you stick to your budget.
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Sep 25, 2014 19:19
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Deception posted:For some reason I thought throwing 10k or more into a bank, would incur a tax. Thank you for stating the obvious in the wiki I should have looked up ha, that's a sigh of relief.
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Sep 25, 2014 19:21
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skipdogg posted:27K isn't a lot of money in the grand scheme of things. Investing it at this point in your life isn't the smart move in my opinion. I'm going to assume you're under the ages of 35. Solid advice. Really. We are under 35, I've been pushing for her to refinance for a while on the car, she's already put down 5k down on it, has had it for about a year. She never misses a payment on any of these things and always pays over the min. She does have an "emergency fund" but it's very small. She is 24 and dealing with a lot of stress, so any advice is great advice that she doesn't have to personally take on right now. Proud to be part of SA right now, you are making a difference in her life. Also want to clarify, her cards were given at a young age, when she virtually had 0 credit. Now she's sitting around 700 and I am trying to take the load off her by doing research to get a lot of this out of the way. Deception fucked around with this message at 19:32 on Sep 25, 2014 |
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Sep 25, 2014 19:24
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Cicero posted:There's some law about banks having to report 10k+ cash deposits (not because it's inherently illegal or anything, the authorities look at those in case of money laundering), I think that may be what you're thinking of. Yes. My wife is a bank manager, transactions over 10,000 dollars get a really routine form filled out (A Currency Transaction Report or CTR for short). Those are no big deal. Now if someone thinks some shady poo poo is going down, a Suspicious Activity Report is filed, and those are a little more serious.
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Sep 25, 2014 19:36
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Deception posted:Solid advice. Really. We are under 35, I've been pushing for her to refinance for a while on the car, she's already put down 5k down on it, has had it for about a year. She never misses a payment on any of these things and always pays over the min. She does have an "emergency fund" but it's very small. She is 24 and dealing with a lot of stress, so any advice is great advice that she doesn't have to personally take on right now. Proud to be part of SA right now, you are making a difference in her life. Everyone here is basically 100% in agreement. Pay off all the lovely high-interest debt, save most of the rest, spend a little on herself. Enjoy not having a car payment or lovely credit card payments for the rest of her life, and save all that money instead. She makes enough money that this can literally change her life and put her in a really good place for the future.
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Sep 25, 2014 19:38
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skipdogg posted:27K isn't a lot of money in the grand scheme of things. Investing it at this point in your life isn't the smart move in my opinion. I'm going to assume you're under the ages of 35. This is the 100% correct answer (although in her situation I would personally think blowing 2.7k of such a windfall is a bit much, but using 90% of it productively would be a win).
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Sep 25, 2014 20:48
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skipdogg posted:27K isn't a lot of money in the grand scheme of things. Investing it at this point in your life isn't the smart move in my opinion. I'm going to assume you're under the ages of 35. Rock solid advice. The next step you two should be taking is making sure that you don't end up in a debt situation like that again. It might not seem like much, but those numbers could easily have spiraled out of control over the next 5-10 years.
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Sep 25, 2014 20:52
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Agreed. Hopefully you're managing to pay off this debt with your budget and the debt doesn't build up again (from what it sounds like, you've got it under control). Really the windfall will be more of "now we have $X more per month to save, how can we budget this to invest now that we don't have these debt payments to make?" Once you're ready to start investing with that extra income, check out the newbie thread and the long term investing thread for help. And condolences to your gf on her mother's death; it can't be easy to deal with all this stuff during such a painful time in her life. Definitely make sure she spends some of it (10% is fine imo) on a nice vacation or something as a reminder of her mom's generosity, but only if she wants to use it that way (maybe charity or something is more up her alley, you would know better than any of us what she would want).
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Sep 25, 2014 21:29
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You all have been amazing thank you so much and I will give you all an update on what she does, I think she's going to take the advice.
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Sep 25, 2014 21:40
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That's nice to hear. I'm don't consider myself old or anything, but I'm in my mid 30's now, and I've experienced a fair bit of life. A lot of ups and downs. I really didn't get my proverbial "poo poo" together until 28 or 29 or so. If any advice can help someone else maybe not experience some of the 'bumps' in the road I've experienced it makes me feel good.
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Sep 26, 2014 01:45
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She's 24 and spent over $17k on a car? That sounds crazy, not to mention borrowing $2k for furniture. Sell the car, buy something cheaper, then use as much of the 27k as possible to pay off debt. I'll be more blunt: She is knee-deep in huge debt and should not spend as much as a single dollar on "herself", i.e. luxury. She needs to tighten the belt buckle (is that an expression in English?) and live more simply. It's fair enough to have student loans, but the debt list sounds like she needs a wake-up call regarding not spending more than what you can afford. Is she spending money frivously? What about yourself, regarding debt and such?
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Sep 26, 2014 10:02
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Deception posted:Current Expenses for her: 1. Immediately pay off Discover, Buckle, and the Bank. (4k, I'm sure there are new charges) 2. Set up emergency fund and divert 6 months of cash there. (9k was tossed out earlier) 3. Direct the rest toward RTG and the car. (2k for the furniture, you should be able to nearly wipe out the car debt) Net result = a healthy six month emergency fund and no consumer debt (The student loans are all low enough interest to not demand immediate attention, just pay them down as you usually would, don't use the windfall for them.)
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Sep 26, 2014 13:57
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I'm going to go slightly against the grain and say that there's probably not complete information in there, and that your furniture probably has an interest rate, but it's one of those deals where it's "no interest for 12 months" and you get dinged with the full 12 months if you don't pay it off by then. My suggestion would be: 1) If it's truly no-interest, pay off Discover/Buckle/Bank/Car all in one shot, which should leave a nice 10K emergency fund. 2) If it's not truly no interest, pay off the furniture too, leaving you a nice 8K emergency fund.
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Sep 26, 2014 14:58
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Remind her that she's almost 50 large in debt right now. Using this windfall intelligently can dramatically improve her financial life, but she's got to get smart about knocking out the rest of the debt. Her monthly payments will be far lower than they were, and it will be easy to get back into the habit of spending it instead of paying for the junk she already has.
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Sep 26, 2014 19:12
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Pay off the furniture, I can guarantee that it is an introductory 0% that adds all the interest back in after 18 months or so. Someone that has this much lovely debt is gonna gently caress up and end up paying 5k for a 1500 couch. After the last day of the introductory period the amount owed will probably double. Don't risk it. Also I would disagree with making a large E fund (At most I would recommend 3k). This person doesn't seem to have budgeting as a priority and will just see that money as something she can burn (even if it is set up as a E fund), and she will increase her spending until its gone or more. Just pay down all the debt she can starting with the furniture, then highest interest first. She could consider putting some of it into a roth IRA as well. Save 1.5k and let her blow it (important so you can convince her to do this.) Encourage her to start budgeting so she can get out of debt and live within her means.
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Sep 28, 2014 17:17
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| # ? Apr 23, 2024 22:39 |
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A 24 year old on that income with that much debt (particularly accrued around those key areas - furniture, car, retail) is very worrying. 27k is a pittance in the grand scheme of things and considering your girlfriend's financial patterns I'd really recommend viewing this as an opportunity for reform rather than a windfall problem solver. The problem is not lack of money, the solution is not a few thousand dollars cash inheritance. As everybody else said, pay off the high interest loans. I'm not sure whether I agree with the guy saying to sell the car, it was a really bad idea getting a loan for it in the first place but now you've got it you'll just be losing even more money getting rid of it. Instead figure out how much it's going to cost to own and maintain it for the next 5 years and put money aside for that -- this includes insurance, rego, 6-12 month check-ups, etc. That goes in a separate bank account and does not get touched except for those specific things. The real problem is that your girlfriend's fiscal responsibility sucks. If she has money sitting in her account, as the above poster said, she will just spend it on dumb poo poo. So don't keep an emergency account that's too big. You presumably live in a ridiculous country like America, so get some decent insurance (not just medical but home and contents, etc). This brings up another opportunity to re-evaluate your daily/weekly spending. Do you spend a lot of money eating out at lunch or buying dumb lazy meals? People who get loans to buy cars out of their income bracket and furniture etc will probably also buy a lot of impulse lunches. Take a few hundred (or half a grand if you know you'll use it) and go to costco and buy a shitload of olive oil, tuna, pasta, canned food, etc in bulk. Stuff that you know how to cook with and use anyway (i.e. don't buy ingredients you've never used before). Buy it in bulk and chuck it in your cupboard and start eating at home more, buy a slow cooker and make big meals on Sunday that you portion out, freeze, and take to work during the week. You have the potential to save possibly several grand a year by investing up-front in cheaper bulk supplies that force you to switch to a greater ratio of home-cooked meals. It's the same general principle behind "poor people can't afford to buy cheap shoes". In short, this money doesn't really mean or do anything in and of itself. It's not enough for that. What it represents is an opportunity to draw a line in the sand, psychologically, between your girlfriend's previous financial irresponsibility and her future life. Pay off the dumb loans, drop a bit of money on the insurance that you've probably been avoiding in order to pay off outstanding debts, and focus on living within your means and not buying dumb stuff. I mean every day people throw away a hell of a lot of furniture that you could be picking up for free, or for the cost of a day's ute rental. Buying fancy themed furniture is something rich people do. Another psychological trick to help this shift might be to open up a long-term savings account. Find a good one that has one of those deals where you sign up with a $2k deposit, and deposit in at least $500 a month (numbers pulled out of my arse) to be eligible for a higher interest rate. Don't put the whole amount in but use the remains of the inheritance to pad out what you can't make from your own income. Hopefully she'll find that the process of accruing savings is addictive and she'll start to re-evaluate her monthly budget to facilitate a more comfortable money-saving pattern. Anyway, just to reiterate, hopefully your girlfriend is a bit smarter and self-controlled now than when she got herself into this mess. But the 27k is an opportunity to distance herself from the mistakes of her past, it's noway near enough to offset the lovely financial behaviour that got her into it. So if any of that behaviour or mentality still exists, you need to help her stamp that out, otherwise the inheritance could have been 270k or 2.7 mill and it still wouldn't make a drat difference. Also I'm very sorry for your girlfriend's loss. Tell her to consider starting a diary where she records her own feelings and thoughts, all the things she wishes she could have said to her mother, but also all the memories she has of her mother. Any questions she has, however mundane ("What did we eat for breakfast on the second day when we holidayed in X country again?") need to go in there and be answered as soon as possible. The longer she gets from the death, the more the memories start disappearing and, at least from my vicarious experience, around the 2 year mark that really starts becoming a major problem with the long-term depression. You're probably better off taking control of her finances now anyway because she's likely in no state to be making big decisions or kickstarting a more disciplined life. It'll be really hard to think about the future or any of the boring administrative stuff so try to help her with that as much as possible.
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Sep 28, 2014 18:47
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