What to do with inheritance money? (San Diego: real estate, renting, condo)

[thetiniestdancer]

Hi all,

I am 23 years old and I have inherited $100,000. I have about a total $20,000 in student loan debts with a 20 year repayment plan and interest for the loans is 2% or 3% - the payment comes out to about $220 a month.

I'm a new grad so I am making $16,000 a year right now. It's tempting to use the money for traveling while I am young and can enjoy it more without any responsibilities - but I also want to make sure I would have some in case of an emergency.

Regarding the debt, I also want to go back to grad school as well to enhance my career and my salary - but this will also incur a lot of debt as well. However, after I finish grad school I would be making a much higher salary too.

How do you think I should best use the money? How much should I invest, and at what rate should I pay off my debt? How often should I use some of the money I have to spend for something special, like traveling?

Many thanks for the help!

[ShelbyGirl1]

Why ask for financial advice on a San Diego. forum? Better advice and responses if you move this to the Financial Forum.

[AADAD]

Pay off the student loan debt. I did that and was grateful. I saved thousands in interest charges. Thousands!

Electronic wire transfer with receipt is the safest.

[afdinatl]

Pay off all bills first

Blow about 3K on clothes and traveling.

put about 5k in savings

put the rest in mutual funds/etc

fund a job that will help pay for your school so that you do not have to use all of your money

[The Flying Dutchman]

If you have any credit card debt, pay those off first, then any auto loans, then student loans. You want to pay off your debt in order of highest interest rate charged. If the student loan is the only outstanding debt you have, consider paying that off right away. Also, if you decide to go back to school, its better to pay as you go.

Look up Dave Ramsey, he's got some good advice about money. 100k may seem like a lot, but you might be surprised how quickly it can disappear. He is a big advocate of staying debt-free (living within your means) and saving (rainy day fund, paying yourself first). His stuff is just common sense, really.

Personally, I'd defer the whole travel thing until you have a more stable career. Look at it this way: You now have a really awesome safety net in case **** (and it will) happens. You'll sleep easier, feel better about yourself, and be more eager to wake up each day to tackle a new obstacle in your life, improving yourself every step of the way. You'll be in control, not the banks or some crappy boss.

One last thing: If you're renting and paying for it, depending on how much you pay in rent, it may also be wise to consider buying a cheap condo. This is another entirely different topic but just a thought. It would mean of course, going into debt, but if you're going to go into debt at all, real estate is a possibility. I'd research this for at least a year before pulling the trigger, however. It's a BFG.

[tickyul]

2% to 3% on a loan of 20K, I would not worry too much about making a lump sum payment with those low rates.....as long as you don't blow the inheritance.

I would work on making extra payments on that loan, for an early payoff, while preserving your inheritance for more important things.

[SportyandMisty]

Spend it all on hookers & blow.

[GuyInSD]

Originally Posted by tickyul

2% to 3% on a loan of 20K, I would not worry too much about making a lump sum payment with those low rates.....as long as you don't blow the inheritance.

I would work on making extra payments on that loan, for an early payoff, while preserving your inheritance for more important things.

Since student loan debt is now tax deductible, I wouldn't think of paying off a 2% loan - it's practically free money. When interest rates go up again (and they will at some point), you'll be able to invest that $20K in something that'll earn a whole lot more than 2%.

[oddstray]

Originally Posted by The Flying Dutchman

...
Personally, I'd defer the whole travel thing until you have a more stable career....

Trouble with this is, it's much more complicated to travel - seriously travel - in the middle of a stable career. OP, is your current job "travel-able" (e.g. working for a national chain like *bucks that will allow you to travel and work shifts wherever you are)? If you have a job like that, then I'd put a small percentage - maybe 5% - of the inheritance to go ahead and travel on that.

[PolarNettles]

At $16K/yr I'm guessing it's not a career-track job. I say to spend $10k to travel and have fun while you're young. It only gets harder the older you get.