wife is getting unexpected $$

My wife is getting some money from where she had a death in the family. She's already been told what she is getting and I'm trying to make the right decision for "US". My wife's plan is to pay off all her credit cards which is about $10,000. Then she wants to sit on the rest which is another $10,000. Someone at her work says they are gonna take taxes out on the money but I read where they can't tax money from a death. My wife's plan we would have about $225-$250 extra a month.

I told her what I would like to do is pay off ALL of the credit cards, hers and mine, and that would leave us with about $2,000-$2,500 out of the money and we would have $520-$545 extra a month. She said she wanted some cushion and didnt want to pay ALL of them off. I said you're getting the money so you do what you want to with it. I also suggested that we sit down with somebody at our bank to give some guidance on what we should do. She said you know they are going to tell us to pay off your credit card(one out of the two I have is through our bank).

I'm needing some suggestions. Maybe she is going to pay hers off and then have some money left and then leave me. :-/

 

If you're truly looking at what is best for you as a couple, I would tend to agree with you. Pay off the credit cards that have high interest rates then build your cushion up with what you're able to save. You'll still have the credit cards so, if something unexpected happens, you can use a credit card then.

 

living debt free sounds like a great cushion to be sitting on.

Leave the cards open unless you have to pay a fee....per clark howard.

 

That's never a good way to look at things.





What's going to a bank going to do for you? reinforce what you suggested? That's all I can see

 

I'd agree with Pugga. As long as you both have the discipline to put the majority of the monthly savings into a "cushion/rainy day" account. Right now it sounds like you're paying the bank/credit card co. If you pay off the cards, you can start paying yourself instead. My opinion FWIW.

 

I don't think she's gonna leave me, I was just joking. I thought maybe if we sat down with a financial advisor they could direct us in the right direction whether it be my way, her way, or a different way. Unless you were saying that my way is the "better" way and thats what the advisor is gonna say too. Both of us are regretting ever getting a credit card or USING it the way we both have. If we get a second chance with a $0 balance we will be smarter about it.

 

Pay off the credit cards, and shred them

 

I don't know how much of a "cushion" she wants or think she needs but thats WAY more than needed to start off with.

 

Yeah I was thinking about closing mine out or keeping one with the lower interest just as an emergency and she can do the same.

 

I don't think there should be any discussion, pay off the cards. There should be no scenario where you stay in debt with that kind of financial gift.

 

keeping one with the low interest sounds smart. not using it unless NEEDED sounds even smarter... but also remember that you can NEVER start out with too much cushion.. I'd suggest (com in from a 22yr old fresh out college with luckily no debt and no cards yet..), do your plan to be at $0 owed and then start saving. But if you're going to do that you should do it with the mind set that "now we're $7,500-8,000 lower than we coulda have been and need to save that money up BEFORE we can start spending any of the extra income. That gives you a couple of benefits: 1. you're already living effectively without that money as is so you won't notice not having it... immediately that is since you will later, and 2. it will reinforce for you that you can actually save money effectively which is a really good feeling

 

Pay off all the cards and start saving!!! no need in paying more interest than needed. use the cards as a backup

 

Pay off ALL the cards, stop using them but keep the account open. It is good to have for things like travel and car rentals and such. Just pay off completely each billing cycle. Then you need at least 3 months emergency funds to start, then build that to 6 months. Emergency is when the trans goes out and needs fixing now, not dinner or vacation. Then pay off any student loans. Then start saving for retirement at least 10% before tax income. Saving for kids college is last, you can get loans for that if needed but nobody will loan you money for retirement. Hers and yours does not work well with money. The debt and income is both of yours together.

 

So assuming you have a typical credit card APR which is around 20%, you are paying lots of interest right now. If you pay off all of your credit card debt it would like putting all of that money in the bank and EARNING 20% interest. That is unheard of in these times. Im lucky to earn 1% in a savings account.

I say pay off all of the debt and then take the money you are saving in payments and put half in a "cushion" fund and the other half in your pocket so you dont need credit cards.

 

I will be speaking from some experience here as my mother passed away last year, and there was some money for the kids (me and my brother and sister), so I am speaking from personal experience here. This may not be what you want to hear however.

While I won't delve into your personal relationships with your spouse and her family, I will ask you to look at one thing for sure: Was the money left to HER, or to the two of you? It was HER family member who died. Perhaps there was some prior discussion between her and said family member about what would the wishes of the deceased be. My mom was very specific about certain things, and out of respect for her, the 3 of us followed what was indicated. Now if the money were from a lottery ticket, or a job promotion, or a "Christmas bonus", then I would say go for it! The two of you split the money onto the credit cards and get the debt paid down.

That is not the case here. A family member died, and left money to a specific person (if I am reading the OP correctly) and it should be ENTIRELY up to that person what to do with the money. I am not trying to be cruel here, but in a case like this, if the money was left to HER and not both of you, then it is entirely her decision what to do with that specific money. Again, this is an opinion here, and you did ask for our opinions.

 

This.

 

My first suggestion would be go talk to a financial planner, my SO and I just did this last week over the phone. USAA I know does it for free, and a lot of bigger banks have them too. Took about an hour and they made suggestions ranging from 401k investment to how much we could comfortably afford to take out to buy a house.

Otherwise, it depends on the interest rate on the cards. Pay off your big interest rates first. Usually credit cards, then student loans, then car, then house in that order. She's right that you should have a cushion, but if it's over 6 mos of net-income then it's not really needed. Not to mention if you pay off some of those cards it will free up some credit along with lowering your monthly payments.

Lastly, it's not her money. It's BOTH OF YOUR money. Anything she does with it that you don't get a say in just makes you resent it. And just paying off her credit cards seems like she just wants to get out from under the debt she's probably had for years. Not necessarily that she wants to leave you.

 

I would certainly pay off any debt you have, starting with credit card debt. Just be sure to mention that everything you pay over your regular monthly payment goes to principle, not principle and interest. Some financial advisers won't tell you that. If you owe, say $5000 total with 10% interest and you just write a check for $5000, you're paying that WITH the interest included, when you could have just paid $4500. If you plan to pay any debt off in advance, you can do that without paying the interest, because the interest time period hasn't occurred yet. I'm currently paying off an engagement ring at twice the payment, with everything over the original payment going straight to principle, which lowers the amount of time I'll be paying the loan off AND lowers the overall amount of interest I'll be paying.

Or go buy new tires

 

I respectfully have to disagree with you there. Money left to someone due to a death in the family is a finicky thing. I had a friend who's aunt passed away and left her with a significant sum of money and was told prior to her death that the money was to be spent on HER, not her husband. (the aunt didn't like the husband) It would be disrespectful to the memory of the loved one to do anything OTHER than what was directed. As I said, NONE of us know the specific dynamics of the family, however in the case of the death of a loved one, things are dynamically different, and the OP should respect that.

 

I haven't really thought about it like that. I was just thinking that since we are married that we are "ONE" and we are in this thing together. My wife always says she's tired of not having any money left after bills and being able to do stuff.