Author Topic: Newbie seeks windfall advice  (Read 4605 times)

WootWoot

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Newbie seeks windfall advice
« on: August 24, 2015, 11:01:36 AM »
Hi folks--
I've been a member of this forum for a couple of years now but have not posted in ages.
Last week, I was informed by a family member that I would be the recipient of a windfall of approximately $25,000. While I'm very happy about this, I'm also rather apprehensive. Here are some of the facts: I'm 51, married to someone who has not had a job in a long time and probably never will again. He is 58. He never was really gainfully employed, and had an unsuccessful business and didn't pay into Social Security so I'm not sure he qualifies for any at age 65. (I'm adding a note here: My husband's inability to work is not up for discussion). We have no children. We have one car. Used to have two, but after I lost the job I had before the current one, we sort of decided we could get along with one. It's a 1999 VW Beetle, in the shop right now for some repairs I don't expect to cost more than $1K. I just got new tires and put them on a 6-month-no-interest credit card; about $400. I owe about $300 in credit card debt and have one credit card (Amazon Visa with points).

I make $30,000 a year. Right now I am putting about $145 in my 403(b) (that includes the matching contribution from my employer). I know that's not enough but I have a very hard time coming up with more. I don't have an emergency fund. I don't have cable. We do have Internet/landline/cell phones for $155 a month (and Verizon is always trying to raise it on us!). We don't eat out much at all (once every couple of months and it's no more than $30). Probably spend a bit much on food because I am on a special diet. I brown bag my lunch every day. No Netflix, rarely buy books (I rely on the library). We do have health insurance through the Affordable Care Act plus my job. Includes a flexible spending account that helps. Rent is $400 a month. I don't want to own a house right now.

I do tend to get a bit spendthrifty when I have a windfall of any kind. (whcih is why I don't have an emergency fund right now). I am a mixed-media artist and I'll buy art supplies. I try not to buy too many clothes (spouse likes to shop at the Salvation Army for his).

So...wondering what to do here. I know I need an emergency fund, and I should pay off any consumer debt. I'm not sure where to keep the emergency fund so that it's somewhat liquid but hard to get at.

Goals include a trip to Europe when I finish my master's degree in two or three years. My tuition is paid for through work.

I'm open to suggestions. Please be kind. :)  Thank you!

lbmustache

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Re: Newbie seeks windfall advice
« Reply #1 on: August 24, 2015, 11:27:40 AM »
If possible, can you break down your expenses further? When I was earning $35k I was bringing home about $2k a month, so yours is a bit less than that? If you can do the case study listed on the main page that would be great, but just filling in some of these blanks would help us:

Rent: $400
Groceries: ?
Utilities: ?
403(b): $145. How much is in this account?
Verizon: $155 (do you need a landline in addition to cell phones?)
CC debt: $700?
Health insurance:???  is this covered by your employer?
Gas: ???
Other expenses: ???

I am having trouble figuring out where the money is going. My concern is your ages and the amount of money you two have, or lack thereof. What will happen if you can no longer work?

I would pay off the CC debt, set up an emergency fund ($5K?) and invest the rest: but I don't know how investing works when you are older so I will leave that for others to address.

Dicey

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Re: Newbie seeks windfall advice
« Reply #2 on: August 24, 2015, 11:41:52 AM »
First, please stop thinking of this as a windfall. Someone worked hard to earn that money you are about to inherit. Just because you didn't doesn't mean you should treat it frivolously.

This is a chance to give your future self slightly more security than you have at present. Pay off the $1700 consumer debt (I'm assuming Amazon card gets paid off monthly or you would have said so, right?)

Next, give yourself a small amount, say $500, to spend as you wish. Give your DH an equal amount if you chose. And not one penny more.

Finally, post a new topic called something like, "I'm 51, with very little savings. I have $22,300 to invest for my future. What should I do?" While you're waiting, hop over to this site and start reading about how to invest so you can grow this generous gift.

http://jlcollinsnh.com/about/

You can do this.

WootWoot

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Re: Newbie seeks windfall advice
« Reply #3 on: August 24, 2015, 12:47:25 PM »
I'll try and fill in the blanks a bit more. Right now I'm taking home $1,050 a month. Monthly expenses are:
Groceries, cleaning supplies, toiletries, are about: $800
Electricity: Approx. $80
Heat/hot water/gas: $98 (I'm on a budget plan)
Water: $50
Gas for car: $100 a month (more or less)
Regarding Verizon: I'm considering dropping the landline. We also do not have smartphones; just regular cells.
Credit card debit is about $800 right now. I usually do pay off Amazon each month.
Health insurance: $240 (this is through the ACA). We do have a deductible/copay we must meet. My husband had to go to the ER last fall and I just paid off the ambulance bill that was not covered by health insurance. It was $50 a month.
My other health insurance is $50 a month; it is dental and vision through my employer. All insurance covers me and my spouse.
I put $50 a month into my flexible/medical spending account.

There is about $60K in my 403(b). I do have some kind of long-term disability through work. Quite honestly, I try not to think about what would happen if I couldn't work any longer.

I know I badly need an emergency fund. That thing with the ambulance could have been avoided easily if I'd just had the money put aside.

Regarding my car repairs--I should not have posted that. They should be taken care of by a trade-in with the mechanic.

Thanks!

P.S. I'm not quite comfortable doing a case study.


If possible, can you break down your expenses further? When I was earning $35k I was bringing home about $2k a month, so yours is a bit less than that? If you can do the case study listed on the main page that would be great, but just filling in some of these blanks would help us:

Rent: $400
Groceries: ?
Utilities: ?
403(b): $145. How much is in this account?
Verizon: $155 (do you need a landline in addition to cell phones?)
CC debt: $700?
Health insurance:???  is this covered by your employer?
Gas: ???
Other expenses: ???

I am having trouble figuring out where the money is going. My concern is your ages and the amount of money you two have, or lack thereof. What will happen if you can no longer work?

I would pay off the CC debt, set up an emergency fund ($5K?) and invest the rest: but I don't know how investing works when you are older so I will leave that for others to address.

LadyStache in Baja

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Re: Newbie seeks windfall advice
« Reply #4 on: August 24, 2015, 01:03:10 PM »
sounds like you need more income, right?!

I'd definitely invest in real estate.  Use that as your down payment and closing costs, and set aside a bit for the first couple of months.

Then keep your eyes open for a rental deal.  You want the rent you'd charge to cover your mortgage, your maintenance fees, and your property taxes and still put money in your pocket each month. 

Don't touch this money while you research real estate investing and look for a good deal.  Then go for it.  You'll turn a small windfall into perpetual income for the rest of your life.  And when your mortgage is paid off, it will be even more.

If you can find a duplex for that price, that'd be the better deal (two rents but only one roof, one yard, one driveway to maintain).

Use trulia or zillow.com to find some properties, and then plug the numbers into this calculator: http://investfourmore.com/rental-property-cash-flow-calculator/?utm_expid=77754495-21.1C3gJtoXTFGVPELFHnItkA.0&utm_referrer=http%3A%2F%2Finvestfourmore.com%2F2013%2F04%2Fcomplete-guide-to-purchasing-long-term-rental-properties%2F

Do not buy art supplies or clothes.  Invest it, and you can buy art supplies and clothes with the proceeds for life.

good luck!

ShoulderThingThatGoesUp

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Re: Newbie seeks windfall advice
« Reply #5 on: August 24, 2015, 01:07:16 PM »
Groceries, cleaning supplies, toiletries, are about: $800

Wait wait wait. What the hell? That's enormous!

WootWoot

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Re: Newbie seeks windfall advice
« Reply #6 on: August 24, 2015, 01:15:42 PM »
I know it is too much. I don't understand how it happens, though. I'm not saying this is *every* month. This is just for the past month. I know we bought a couple of six-packs to celebrate my birthday. But certainly that doesn't add up to $800. And believe me, we are not eating lobster, shrimp, or anything else of that ilk.

EDIT: We spent $395 in that category in June. So it's definitely not $800 every month.

Groceries, cleaning supplies, toiletries, are about: $800

Wait wait wait. What the hell? That's enormous!
« Last Edit: August 24, 2015, 01:19:46 PM by WootWoot »

rpr

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Re: Newbie seeks windfall advice
« Reply #7 on: August 24, 2015, 01:26:43 PM »
I don't understand the numbers. You said you make $30k a year. But in another post you said you only take home $1050 a month. Is that twice a month? Looking at what you have listed for spending so far looks like it is greater than $2000. I know that you did not want to do case study, but take a good hard look at your current expenses. 

Seppia

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Re: Newbie seeks windfall advice
« Reply #8 on: August 24, 2015, 01:37:17 PM »
I don't want to sound too harsh but it seems to me that at least part of the problem is how you keep track of your expenses.
If you have a limited idea of how the money goes out its really difficult to act on it.
There's people on this forum making huge money that could tell you how much they spend in a certain category down by the penny, and they wouldn't need to (because they already save a ton).

Back a couple years ago I thought "well I spend much less than what I make so I don't need to keep track of my expenses".
I was wrong, there was a HUGE amount of optimization left on the table, and I am a reckless spender by this forum's standard (I even do scuba diving!).

Since you seem to be a little tight, I would say priority number 1 would be to start keeping precise track of how you spend your money, you can't allow yourself to say "well it's $800 in groceries. No wait maybe $395".

Again sorry if I sound too harsh

WootWoot

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Re: Newbie seeks windfall advice
« Reply #9 on: August 24, 2015, 01:41:40 PM »
Oh crap...you're absolutely right. It is about $1,023 per paycheck. I guess I'm very nervous about this whole thing, and I'm kind of bad at arithmetic.

I don't understand the numbers. You said you make $30k a year. But in another post you said you only take home $1050 a month. Is that twice a month? Looking at what you have listed for spending so far looks like it is greater than $2000. I know that you did not want to do case study, but take a good hard look at your current expenses.

WootWoot

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Re: Newbie seeks windfall advice
« Reply #10 on: August 24, 2015, 01:44:13 PM »
Part of the problem is that I am at work and I don't have access to all my numbers right now. My credit union is supposed to have a "sort" feature in its statements so that I can, say, add up all the Wal-Mart purchases for the year. But it never works properly. I tried exporting it to Excel to do same and it was a freaking nightmare as I'm not too proficient in that program. This *should* be easy because I use my debit card for just about everything and rarely carry cash. Oh dear. 


I don't want to sound too harsh but it seems to me that at least part of the problem is how you keep track of your expenses.
If you have a limited idea of how the money goes out its really difficult to act on it.
There's people on this forum making huge money that could tell you how much they spend in a certain category down by the penny, and they wouldn't need to (because they already save a ton).

Back a couple years ago I thought "well I spend much less than what I make so I don't need to keep track of my expenses".
I was wrong, there was a HUGE amount of optimization left on the table, and I am a reckless spender by this forum's standard (I even do scuba diving!).

Since you seem to be a little tight, I would say priority number 1 would be to start keeping precise track of how you spend your money, you can't allow yourself to say "well it's $800 in groceries. No wait maybe $395".

Again sorry if I sound too harsh

purplearcanist

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Re: Newbie seeks windfall advice
« Reply #11 on: August 24, 2015, 01:50:07 PM »
Wait what about trying to use Mint to do this?

NoraLenderbee

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Re: Newbie seeks windfall advice
« Reply #12 on: August 24, 2015, 01:56:26 PM »
Oh crap...you're absolutely right. It is about $1,023 per paycheck. I guess I'm very nervous about this whole thing, and I'm kind of bad at arithmetic.

I don't understand the numbers. You said you make $30k a year. But in another post you said you only take home $1050 a month. Is that twice a month? Looking at what you have listed for spending so far looks like it is greater than $2000. I know that you did not want to do case study, but take a good hard look at your current expenses.

What I suggest is:
--Set aside money for the car repair.
--Pay off all your CC debt. For the 0% card, set aside the money to pay it off in full before the 0% rate expires.
--Set aside 2 months' salary as an emergency fund. (I would do more, but I'm pretty cautious.)
--As Diane C said, set a little aside to enjoy now.
--Put the rest in a savings account or 1-month CD and leave it there while you figure out what to do. You won't leave it there forever; you're just parking it in a safe place for now.

Then take your time to learn about investing. Given your ages, it might make sense to fully fund an IRA or Roth IRA for yourself and your husband. I would recommend fairly conservative or middle-of-the-road investing choices because this isn't money you can afford to gamble with. Take your time and keep asking questions.
You definitely need to figure out what you're actually spending each month.

thedayisbrave

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Re: Newbie seeks windfall advice
« Reply #13 on: August 24, 2015, 01:56:42 PM »
Part of the problem is that I am at work and I don't have access to all my numbers right now. My credit union is supposed to have a "sort" feature in its statements so that I can, say, add up all the Wal-Mart purchases for the year. But it never works properly. I tried exporting it to Excel to do same and it was a freaking nightmare as I'm not too proficient in that program. This *should* be easy because I use my debit card for just about everything and rarely carry cash. Oh dear. 


I don't want to sound too harsh but it seems to me that at least part of the problem is how you keep track of your expenses.
If you have a limited idea of how the money goes out its really difficult to act on it.
There's people on this forum making huge money that could tell you how much they spend in a certain category down by the penny, and they wouldn't need to (because they already save a ton).

Back a couple years ago I thought "well I spend much less than what I make so I don't need to keep track of my expenses".
I was wrong, there was a HUGE amount of optimization left on the table, and I am a reckless spender by this forum's standard (I even do scuba diving!).

Since you seem to be a little tight, I would say priority number 1 would be to start keeping precise track of how you spend your money, you can't allow yourself to say "well it's $800 in groceries. No wait maybe $395".

Again sorry if I sound too harsh

I use an Excel spreadsheet for this very reason. 

WootWoot

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Re: Newbie seeks windfall advice
« Reply #14 on: August 24, 2015, 02:04:17 PM »
I'm sure this comes under the "learn about investing" umbrella, but, if I have a 403(b) through my employer (and it is a reliable one through TIAA-CREF), why would I need a separate IRA?

Oh crap...you're absolutely right. It is about $1,023 per paycheck. I guess I'm very nervous about this whole thing, and I'm kind of bad at arithmetic.

I don't understand the numbers. You said you make $30k a year. But in another post you said you only take home $1050 a month. Is that twice a month? Looking at what you have listed for spending so far looks like it is greater than $2000. I know that you did not want to do case study, but take a good hard look at your current expenses.

What I suggest is:
--Set aside money for the car repair.
--Pay off all your CC debt. For the 0% card, set aside the money to pay it off in full before the 0% rate expires.
--Set aside 2 months' salary as an emergency fund. (I would do more, but I'm pretty cautious.)
--As Diane C said, set a little aside to enjoy now.
--Put the rest in a savings account or 1-month CD and leave it there while you figure out what to do. You won't leave it there forever; you're just parking it in a safe place for now.

Then take your time to learn about investing. Given your ages, it might make sense to fully fund an IRA or Roth IRA for yourself and your husband. I would recommend fairly conservative or middle-of-the-road investing choices because this isn't money you can afford to gamble with. Take your time and keep asking questions.
You definitely need to figure out what you're actually spending each month.

zinethstache

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Re: Newbie seeks windfall advice
« Reply #15 on: August 24, 2015, 02:08:33 PM »
First I want to say congrats! Second, don't panic, if anything put it in savings until you carefully research what to do. While it is in your savings, it IS your emergency fund.

I do think you should really focus on your comfortable investing "zone". I am a property investor, not a stock investor.

I know you like to rent and that is perfect for you, but the person who mentioned rental real estate is onto something. It is not for everyone, but will give you good income month after month. You do need to keep "reserves" always for any unexpected major fixes, this is over and above your emergency fund.

Investing in the stock market has its own risks, and how friday went, it  is not looking good to me right now:) Stocks make me nervous in one way, rentals another.

I like the poster who mentioned that this money was hard earned by someone so you need to be the best custodian with it that you can be. Don't be in a rush to spend it!

Tyson

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Re: Newbie seeks windfall advice
« Reply #16 on: August 24, 2015, 02:11:21 PM »
First off, welcome 'back' to the forum, you are among friends here.  I'm no super-mustacian but I'd recommend taking a hard look at any recurring payments that you might be able to just get rid of by paying it off.  There's a serious amount of relief when you reduce the number of bills and number of different payments you have to make each month. 

After that, I'd look at having some cash savings.  2 or 3 months worth would be fine, so between $4k-$6k.  The rest I'd invest.

I also 2nd the advice to track your budget a little more closely.  Don't worry about "optimizing" it at first.  Just focus on being able to see exactly where the money goes.  Once you get a handle on that (it may take a few months), then it's a lot easier to ease into some optimization, IMO.  Personally I have no patience for a spreadsheet, so I use Personal Capital because it automatically imports all my debit charges, credit charges, mortgage info, and auto-sorts bills like electricity, cable, gas, and water.  I tried Mint, and it's good too.  I just ended up with Personal Capital because it had less problems connecting to my bank info. 

lbmustache

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Re: Newbie seeks windfall advice
« Reply #17 on: August 24, 2015, 02:26:28 PM »
Part of the problem is that I am at work and I don't have access to all my numbers right now. My credit union is supposed to have a "sort" feature in its statements so that I can, say, add up all the Wal-Mart purchases for the year. But it never works properly. I tried exporting it to Excel to do same and it was a freaking nightmare as I'm not too proficient in that program. This *should* be easy because I use my debit card for just about everything and rarely carry cash. Oh dear. 


Don't stress too much yet :) We're here to help you out. I added up the numbers you gave us, there is a "leak" somewhere. Money is going someplace you haven't though of, or allocated for.

Your income is approx $2046/month. The expenses you have given us are about ~$1800 (I just assumed $50 min payment for cc's). That's about $200 floating around, perhaps it is going to the groceries catchall. I agree with the other people, track your expenses for a month or two to figure out where money is going, and then you can act on fixing some of the holes.

Seppia

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Re: Newbie seeks windfall advice
« Reply #18 on: August 24, 2015, 03:24:48 PM »
I didn't want to be negative, I'm sorry if I came across that way.

My point was: start tracking your expenses precisely.
Find the way that best suits you: personally, I keep a "notes" file in my cell and put every expense there, then at the end of the month I transfer them on an excel spreadsheet.
I don't use apps for that as I have significant work related expenses on my CC that get reimbursed so it's easier just to note down what I spend.

Tracking has two big benefits for me:
The first one is strictly psychological: if every time I buy something I have to note it down it makes the purchasing more "painful", thus helping me save.
I actually skip "drinks out" at least a couple times per month just because of that. Now here in NYC that alone means $80 saved per month, for example.
The second benefit is that tracking helps you isolate the "issues" and focus your attention where needed most.
I for example discovered that I was doing great on groceries and restaurants , but was spending a ton of cash in casual drinks out.

NoraLenderbee

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Re: Newbie seeks windfall advice
« Reply #19 on: August 24, 2015, 04:38:47 PM »
I'm sure this comes under the "learn about investing" umbrella, but, if I have a 403(b) through my employer (and it is a reliable one through TIAA-CREF), why would I need a separate IRA?


You might be eligible to do the IRA as well as the 403b--it depends on your income. Even if you personally aren't eligible to do an IRA, you might be able to do one for your husband. The reason to consider it is that an IRA allows you to save money in a way that can lower your taxes, either today or in the future. But this isn't something you need to figure out right now, and people here will help when the time comes.

Rosy

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Re: Newbie seeks windfall advice
« Reply #20 on: August 24, 2015, 07:51:02 PM »
First off CONGRATS:) Second, don't panic, it is good to remember that while your track record of hanging on to money isn't great, you have paid your dues in the past and you are now turning over a new financial history page:), you can do it!

You are right about being scared of losing an amount that will be very hard for you to replace - but, you are honoring this gift from the "Universe" - it is all good - you can do this, there is no rush.

I like the idea of $500 for each of you to spend as you like. Then I would sit down and do a real budget - you might have to hunt down information from 3 months back or whatever, but starting right now you will keep better track. That way you will have "real" numbers to work with for next month.
There is a leak and I bet there are a ton of things you could consider, if you only knew where it was all going:).

The $400 rent is real nice and perhaps it is smart not to mess with that.

OK then, you are a bit scared of turning it all into emergency fund and I don't blame you. It might disappear slowly and since you are not real savvy about finances, investments should be the least of your worries for now. However, that IRA suggestion for your husband which will also result in tax savings might be a consideration - educate yourself on that - read up on it - open another thread on that subject.

So here is my suggestion, call it your DISCRETIONARY FUND ALLOCATION:

1. Medical: You've had that recent emergency expense - take that amount, add in your deductible, plus say $2000 on top. That is now your dicretionary fund for medical expenses! Must have for peace of mind. Probably at least 5K total

2. Car fund: Repairs, tires, batteries, funds for replacing car - say $ 5000

3. Three months of living expenses - gives you peace of mind. Take that $1800 or whatever your budget number is  x 3 = $5400 and breathe easier:)

4. Vacay - weekend away - trip to Europe - set aside $1500 to start - you need fun goals too or you'll stop trying.

5. Luxury items-  art supplies - electronics - nice dinner out - take a class -kitchen gadget - whatever floats your boat - gifts - holidays - set aside $ 500.

6. Immediate emergency fund $1000 always!

7. Whatever is left can go toward retirement savings or a CD - that way there are penalties for withdrawals, keeping you from spending it and you are building a safety net for yourself.

Most credit unions and banks will let you set up as many separate savings accounts as you like, each with an individual goal and you can add $25 or $100 a month to whichever account you need/want to boost the most.
My credit union has what they call a holiday club savings account, which gives you 3% interest, but there is a penalty for early withdrawal - perfect for vacay and holiday allocations.

Finally, stop thinking of it as a windfall of $25,000 - think of it as a windfall of $500 each and a thank the lord or the universe:), peace of mind fund for you to build your new financial life around. This is so exciting!:)

I'm not good with spreadsheets so I actually use pen and paper for my budget. (I know:), but it works just fine. A budget is important, just keep working at it every month, it will get so much better. You need a plan - for now and for 3 or 6  months down the road. An intermediary plan for one year - where do you see yourself then?
Where do you want to be in five years - how can you make it all happen? You just got your chance and yes, you can do this:) ... and yeah, yeah, do pay off your bills every month, but you already know that drill.:) You will do fine.

Good luck - keep asking questions and work it, you can do this. Don't over think it and don't be in a rush - think about your values and how you can achieve more financial security.