Author Topic: Small Windfall  (Read 2126 times)

MustardTiger

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Small Windfall
« on: September 10, 2016, 07:18:19 PM »
I am getting an inheritance from the sell of my Grandmother's house that will be around 5k.  I will have to allocate between 1k-1500 to fix some seriously messed up windows in my house.  I want to know what you guys suggest we do with the rest.

Debt:
Student loan 1 - ~6k
Student loan 2 - ~5k
Student loan 3 - ~6k  5.75%
Car loan              9200 3.2%
Mortgage           ~68k 3.75%

E-fund is 3k

Student loan's 1 and 2 will be eligible for teacher loan forgiveness in 2 years so I am only paying the min (thinking about deferring those actually but haven't researched if that will affect anything)

Right now my wife is staying at home with my 5 month old daughter and working a little on the side.  We make enough on my salary to cover all expenses but we are only saving 20%ish.  We are starting to consider having a 2nd kid and my wife wants to save this money for this event that might happen in the next 2-3 years.  She is all about feeling comfortable and doesn't want to start trying until we have ~10k saved for the birth, which including my HSA means we need about 6k cash.  We also want to move to a newer/bigger house whenever she goes back to work full time (4-5 years most likely).  Our house would probably sell for 160k conservatively so we would be fine for a down payment but it would be impossible before she is back at work to pay the mortgage and save anything.

I think the math says just put that money towards the high interest student loan but she wants to save it for the 2nd kid fund.  We both agree that we can't buy a new house until she is back and work and we have all the debt paid off anyway.

Jon Bon

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Re: Small Windfall
« Reply #1 on: September 10, 2016, 08:11:03 PM »
I would say Car or Student loan.

Car is the lowest, but its the worst kind of debt. I also think I am obligated to face punch you or something like that. MMM Code of ethics page 3 subsection 24....

Mortgage and student loan you can deduct the interest on your taxes assuming that you itemize. I don't know your income levels or even if you itemize. So YMMV.

If your cash flow situation monthly it tight pay off completely one of the student loans to free up that monthly cash flow, if not pay off the car or better yet sell the car (see face punches above)


Choices

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Re: Small Windfall
« Reply #2 on: September 10, 2016, 10:08:44 PM »
Congrats on your new baby! Yay!

As for the 5k, what about a compromise? You could put half on student loan #3 (higher interest rate than car) and half toward saving for your next kid.

I'm not sure of your ages or your desired age gap between kids, but sometimes having a kid takes longer than you think so waiting a long time to start trying can leave quite a large age gap. This means it will also be longer before they're in school and she goes back to work.

There are no right or wrong answers, just what the two of you feel works best for your family.

JLee

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Re: Small Windfall
« Reply #3 on: September 10, 2016, 10:22:49 PM »
Refinance the car to 1.99% (penfed) and pay off student loan 3.

Dicey

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Re: Small Windfall
« Reply #4 on: September 11, 2016, 02:27:00 AM »
^^^What JPL said.^^^

Catbert

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Re: Small Windfall
« Reply #5 on: September 11, 2016, 02:49:32 PM »
In the short run I'd put into the emergency fund after you fix up those seriously messed up windows.  Keep building your e- fund until you have an "extra" 6K over whatever minimum works for you.  Then pay off SL 3 and build your e-fund back up using the monthly payment saved from SL3.

I'm being very conservative b/c:  new baby, one income family, nervous wife, and another baby planned.  3K is a pretty minimal e-fund for those circumstances although I don't know all your circumstances.