Life Situation: Single, living with S/O of 6.5 years. We have been talking about marriage in the next couple years, after we get out of debt. My S/O and I are both 25. No dependents. We live about 35 miles outside of Washington D.C. in a stupid high COL area. The average SFH in my area is $555,000. I am a video production contractor and she is a federal employee.
Our combined Gross Salary/Wages: $148,000, I make $93,000 and my S/O makes $55,000
Net income: $95,000 / $7,900 a month
Debt: (preparing for face punches)
Student loan: $5,500 @ 6.8%
Student loan: $975 @ 3.4%
Student loan: $675 @ 6.8%
S/O Student loan: $62,000 @ 6%
Honda Element: $5,200 @ 5.5%
Honda Civic: $5,000 @ 5.0%
Credit card: $3,900 @ 10%
Debt consolidation loan $14,300 @ 15.15%
Total Debt: ~$97,500.00. We made a lot of stupid financial decisions in college like taking out variable interest rate credit cards with up to 25% interest rates. We’re definitely paying for it now. My S/O went to a very expensive private school. I went there as well but fortunately I dropped out and got my associates degree instead at a very affordable community college.
Expenses:
Rent: $1,500
My Student Loans: $100
S/O Student Loans: $350
Insurance (car, renters, etc): $150
Credit Card: $160
Gas: $100 I occasionally bike the 7 miles to work. My S/O has a sweet commuter benefits plan and gets to ride a bus that is a 3 min drive from our apartment to right outside her office for free! Normally it’s $9 each way. Unfortunately it’s 3 miles on a highway so she can’t get there by bike.
Phone: $175 (insert face punch here)
Utilities: $125
Internet: $70
Civic: $250
Personal Loan: $500
Element: $230
Food/Fun: $800 (insert face punch here) This also includes Netflix, Amazon Prime and Hulu.
Total monthly expenses: $3710.
These numbers are including more than minimum payments. This leaves us with about $3400/mo extra that we have been snowballing our debt down with. We also use this money as a sort of flex fund that we can use for unexpected expenses if they pop up. In the past 10 months we have paid off 5 high interest credit cards and saved to move into a new apartment without using credit to afford the first and last months rent and a security deposit. We are on track to finish paying off our debt besides my S/O’s student loans in the next year. Fortunately we are both still on our parents health insurance for another year.
Assets:
401k 1: ~$10,000 Contributing the full company match
401k 2: ~$7,500 (I need to roll this over to my current 401k) Contributed the full company match
TSP: $7,000 Contributing the full company match
ROTH IRA: $1,200 My mom gifted me this recently to teach me about investing.
Inheritance: $100,000. I am getting this in the mail tomorrow(!)
Total Assets: $125,700
Specific Questions:
I have read Bogelheads “what to do with a windfall” article and other blog/forum posts but I think that my situation might be a little different than a lot of those people. Right now I am living pretty comfortably, and while it would be great to wipe the slate clean and eliminate all my debt, my S/O and I have been working on paying down our debt and have a plan to be done with all of it in the next two years. Her student loans would be a year and the rest of our debt a little less than a year. I was thinking that my Great Auntie who I’m inheriting from would be very happy if I invested the money she is leaving me for my future like she did. She made a modest salary as a secretary but managed to save and invest enough to leave me, my sister and 4 cousins $100,000 each. If I “set it and forget it” into a fund like VTSAX I could just continue living my life and continue paying down debt like it never happened. I want to get in a large lump sum as soon as I can so it can start accruing interest while I’m still relatively young.
-Is this a bad idea?
-If so, what would you do with the 100k instead?
-If no, do you think I should do 1 lump sum, or maybe something like stagger the $100k over 10 months at $10k investments each? The economy is at an all time high and it’s freaking me out.
-What is your general assessment of our situation?
-Do you think that snowballing from smallest amount to biggest and ignoring interest rates for the psychological woohoo-we’re-doing-it! feeling is foolish? That’s what we’ve done so far and it’s been working OK, even though we are probably paying more in the long run.
Thank you all for your help! I am young and dumb and I don’t want to squander this opportunity.