Author Topic: Small inheritance and a debt emergency  (Read 2010 times)

tuyop

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Small inheritance and a debt emergency
« on: April 24, 2013, 11:55:18 AM »
I just inherited $10 883. I'm kind of wondering what to do with it. Here's a brief summary of my situation:

Debt (interest): Balance (payment)

VISA (.99% consolidation rate until Feb 2014): 2800 (who knows, like $15, I currently dump 1900 on this/month)
Student Line of credit* (4.5%): 14 500 (130)
Car loan (2.9%): 18 100 (376) - The car is worth about 10k

*Sort of like a private student loan, cosigned by my father.

I'm also going back to school in September. It may be paid for by military disability. However, I've been waiting three years for a decision on that and I'm done wasting my life so I'm going whether they pay for it or not. Worst case, tuition could potentially cost me 13k, and I'd be working part time and most of our needs would be met by my spouse's salary.

So, I'm not really sure what to do with this windfall.

1. I've been fantasizing about selling my car and using a portion of the proceeds to buy a bike for my partner (and replace mine with a slightly nicer one) and going full bicycle. This would save us about 20% of our income per month (bringing us up to 80% savings rate) and wiping out more than half of our debt at once. It requires some lifestyle redesign, and we're being separated by the military next month so I don't really know what to do about that.

2. Pay down highest interest debt and carry on as if nothing happened.

3. Save for potential unemployment until August. I'll have my answer whether the military is giving me disability or not no later than mid-August. I kind of really want to go this way, since the cost in interest is only about $3001 if I put the money in a 2.6% savings account (advertised rate on my savings account). After I leave the military, I can either pay my tuition or pay off debt with the money. However, when I leave the military I'll be getting about 30k in retirement contributions and severance, so saving or not right now isn't really a dealbreaker either way.

1 interest cost on 36 000 at 3.9% for six months minus interest earned on 10 883 at 2.6% for six months. Not sure if I did this right.

twinge

  • Bristles
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Re: Small inheritance and a debt emergency
« Reply #1 on: April 24, 2013, 12:05:58 PM »
Quote
Quote
. It requires some lifestyle redesign, and we're being separated by the military next month so I don't really know what to do about that.

What are you going to do car-wise when this separation happens?  That affects advice.  I'm all for selling the car, though I would try to get by on your slightly less nice bicycle until you're out of debt :).

My thoughts:
If you can sell the car, use that and your inheritance to wipe out the student line of credit and use the leftovers to buy a bike/create some savings/pay down more debt. That would also free up the 130/mo to add to paying down your car loan.  Don't forget in tuition to include cost of books etc. and do realistic planning if the degree is worth it if you have to pay. And how does the spousal military separation affect living off spouse's salary during grad school?

.22guy

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Re: Small inheritance and a debt emergency
« Reply #2 on: April 24, 2013, 12:16:20 PM »
Where are you getting 2.6% on a savings account?

tuyop

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Re: Small inheritance and a debt emergency
« Reply #3 on: April 24, 2013, 12:26:48 PM »
Where are you getting 2.6% on a savings account?

President's Choice Financial.

Sorry, I should clarify. My spouse is being posted to the city where I will be going back to school. I'm being moved to the other side of the country for no reason.

I don't know what we're going to do about the car, since it's staying with me when she moves (I need it to drive across the country, she's getting a flight). I hope she can find a place within 10km of her work and use public transit and a bike. She's getting a bonus so I think she'll be buying a bicycle with that.

I'm upside down on the car. I can only sell it if I give the bank an additional 8000 to make up the balance of the loan.

I'd do that, but I'm pretty sure I'll be living in the car (again) starting in May to save money on rent. I'm open to living in a tent instead.

The degree is a one year Bachelor of Education at U of Alberta, tuition, books, and fees are 13k. This degree "costs" one year of employment at 53k+13k in tuition, and it will increase my income to 62k and give me a job that I love.