Any advice on what to do with inheritance?

[smile90000]

My mother recently passed and now I'm starting to get part of my inheritance. I have no idea what to do with it.

I'm over 35. Have no kids. No credit card debt. Only debt is student loans which are at 3.21%.

The inheritance will probably total around $100,000. I'm frugal (my car is about 15 years old. shop at goodwill, etc.) but just have no idea what to do with the money.

Any suggestions on how to approach dealing with the money?  I'm not stupid but besides putting it in a CD I have no idea what to do.

 I'm kind of scared of screwing this up.  

[Anonymous]

Sorry about your loss.

[Anonymous]

Sorry for your loss, I am sure she would be proud this opportunity she is leaving behind. There is definitely enough money at play you need to speak with an expert or two. Maybe one tax and one fee only financial planner that will not be selling something, the answers they give you will depend on your answers. Questions such as how long you plan to work, if you would be a landlord, how much is left in loans, do you have an emergency fund currently, and most importantly is this inheritance invested in something currently, life insurance proceeds or from the sale of the estate. That last part is where a tax expert may come in depending.

[Callandra]

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@smile90000 wrote:

My mother recently passed and now I'm starting to get part of my inheritance. I'm very sorry for your loss. I have no idea what to do with it.

I'm over 35. Have no kids. No credit card debt. Only debt is student loans which are at 3.21%.

The inheritance will probably total around $100,000. I'm frugal (my car is about 15 years old. shop at goodwill, etc.) but just have no idea what to do with the money.

Any suggestions on how to approach dealing with the money? Callandra always takes donations to the Needy Callandra Fund. I'm not stupid but besides putting it in a CD I have no idea what to do.

 I'm kind of scared of screwing this up.  

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Okay, to seriously answer the question...you could invest it, save it (get a high interest savings account), or spend some of it. This depends on what you want to do...you could invest in stocks/mutual funds/etc., or even in real estate. Some areas, you could buy a condo for that and get rental income (but being a landlord is not for everyone!). Maybe find a financial planner...do you have an IRA? 

[Anonymous]

The 3 general options I'd recommend for inheretance money are: pay down/eliminate debt, save, and invest, in that order. 

Even with your low interest rate on student loans, money you owe is almost always going to have higher interest rates than money you invest. So if you can pay off your loans in one shot, I'd go for it. If you have more than the inheretance value in student loans, then you can use financial calculators and/or talk to a financial advisor to figure out how much you should pay off. Depending on how much student loan debt you have, your current situation and other factors, it may make sense to pay off a big chunk of it now or wait.

Next, I would put the equivalent of 6 months' to a year's salary in savings if you don't already have that set up. That allows you to have a financial cushion in case of an emergency.

With whatever is left after those two steps, I'd invest the rest. It would be a good idea to talk to a financial planner and/or a lawyer about this, since there are a lot of ways to invest. You can buy property or get involved in the stock market or start a business or lots of other options. 

It's awful to lose a parent, but your mother wanted you to have the money to help you now that she's gone. Take care.

[Anonymous]

So sorry for your loss. You should definitely get a financial planner.

[Anonymous]

What is your current living situation? If you don't already own a house, I would suggest putting a big chunk of that down on a mortgage.

[Kevin86475391]

I'm so sorry for your loss.

I agree that talking to a trustworthy, fee-based financial planner who isn't trying to sell you something to get a commission is a great start.

It will depend largely on your goals and priorities, but if you don't have any high interest debt and have a reasonable amount of savings in an emergency fund, I would personally focus primiarly on funding retirement and if your retirement contributions are already maxed out for the year on regular investing...but that's also my bias speaking because those are my priorities and preferences. It's never a guarantee when you invest but historic averages for the stock market are around an 8% return. So I really do think it's quite reasonable - but never guaranteed of course - to expect to beat the 3.2% student loan rate simply by investing in a diversified portfolio (which can be accomplished cheaply and effectively by purchasing no- or low-cost ETFs). My personal threshold would be to pay off anything at 5% or higher, but not something at under 5%, but again, that's just me. If you'll feel much more secure and content by paying off your student loan then you may want to do that.

Being a homeowner isn't for everyone, but if you do want to become a homeowner and aren't already, then this would certainly be an excellent opportunity to make a great downpayment, cover other expenses, and have enough saved up to still feel secured. Personally, I'm not and don't want to be a homeowner, so I wouldn't go in that direction, but it certainly makes sense if that's one of your goals.

I wouldn't personally put much in CDs, maybe some depending on your desired allocation and risk tolerance, but at 35 I think investing heavily in CDs and fixed income is a bit too conservative and you'd be better served with a more moderate growth oriented portfolio. Again, just my opinions colored by my own attitudes and priorities though. Speaking with a trustworthy expert who can help you better determine your own financial goals and priorities would be a great move IMO.

Best of luck with whatever you decide.

[smile90000]

Thanks to everyone for the suggestions. They really helped me think about how to approach having the money. 

You asked about an emergency fund.  I have an emergency fund of about a year. I am frugal and blessed. 

So after reading your emails and talking to an acquaintance of mine (who ironically grew up poor and is now extremely wealthy), I decided on the following...

1. I'm going to relax and not feel like I have to do something with the money immediately (I don't know why I felt I needed to do something with it now. There is not any rush)

2. NOT pay off my student loans early. I still get to deduct the interest at tax time. When my income gets so high I lose that benefit, then I will pay it off

3. Start looking into saving for retirement. i do freelance work and haven't been thinking about it, but will start. My emergency fund is such that I feel like I can relax a little. 

4. READ. READ. READ. A highly underestimated hobby. I just need to become more informed about money so that I feel comfortable making decisions. 

5. Finally, I've accepted that it is okay if I still shop at goodwill, even if I have $100,000 in the bank. I honestly thought something had to be wrong with me because I was still going there!

Thanks again everyone!