What would you do with Inheritance?

maple2 · June 2015

brij2006 said:

vlagrl29 said:

Even if it's not your forever home still pay it off. We aren't in our forever home but when it comes time to move then we will just take all the money we get form this house as cash and put it towards the next house.

Same here. This isn't our forever home, but we can make a lot of progress with investing and giving, with the extra month to month cash from a paid for home. Yes, putting that lump sum into an investment may yield more when it comes to math, but we like the idea of knowing that without a mortgage payment, our life decisions can change and we won't have to worry as much about money. If we have baby #2 and I suddenly decide I want to go part time, then we can. We also like the idea that if something drastic were to happen, we don't have to worry about not being able to pay the mortgage and losing our house. But hey, we have hundreds of thousands in our investments, yet we're getting foreclosed on. Not something that's worth even chancing it, to us.

I don't think there is necessarily a right or wrong answer here, so whatever makes you comfortable is probably the best choice. I tend to fall into the less debt adverse camp, and we have chosen to put extra money into investments rather than pay down our mortgage. We prefer the possible risk of losing money in the market to the more likely risk of paying our mortgage and effectively losing interest income.

The way we look at it, if something drastically changed our monthly cash flow, we could draw money from our investments to cover the difference. DH has an incredibly safe job, which makes it easier for us to downplay the risk of major changes in our monthly budget. We have chosen not to put all our investment money into restricted categories like tax advantaged retirement accounts and 529s so that we could withdraw money without penalty if need be. I can't imagine a scenario under which we would choose foreclosure and keep our investments.

vlagrl29 · June 2015

maple2 said:

brij2006 said:

vlagrl29 said:

Even if it's not your forever home still pay it off. We aren't in our forever home but when it comes time to move then we will just take all the money we get form this house as cash and put it towards the next house.

Same here. This isn't our forever home, but we can make a lot of progress with investing and giving, with the extra month to month cash from a paid for home. Yes, putting that lump sum into an investment may yield more when it comes to math, but we like the idea of knowing that without a mortgage payment, our life decisions can change and we won't have to worry as much about money. If we have baby #2 and I suddenly decide I want to go part time, then we can. We also like the idea that if something drastic were to happen, we don't have to worry about not being able to pay the mortgage and losing our house. But hey, we have hundreds of thousands in our investments, yet we're getting foreclosed on. Not something that's worth even chancing it, to us.

I don't think there is necessarily a right or wrong answer here, so whatever makes you comfortable is probably the best choice. I tend to fall into the less debt adverse camp, and we have chosen to put extra money into investments rather than pay down our mortgage. We prefer the possible risk of losing money in the market to the more likely risk of paying our mortgage and effectively losing interest income.

The way we look at it, if something drastically changed our monthly cash flow, we could draw money from our investments to cover the difference. DH has an incredibly safe job, which makes it easier for us to downplay the risk of major changes in our monthly budget. We have chosen not to put all our investment money into restricted categories like tax advantaged retirement accounts and 529s so that we could withdraw money without penalty if need be. I can't imagine a scenario under which we would choose foreclosure and keep our investments.

that would be good for you. If we withdrew money we would get taxed on it as income and the 10% penalty.

brij2006 · June 2015

vlagrl29 said:

maple2 said:

brij2006 said:

vlagrl29 said:

Even if it's not your forever home still pay it off. We aren't in our forever home but when it comes time to move then we will just take all the money we get form this house as cash and put it towards the next house.

Same here. This isn't our forever home, but we can make a lot of progress with investing and giving, with the extra month to month cash from a paid for home. Yes, putting that lump sum into an investment may yield more when it comes to math, but we like the idea of knowing that without a mortgage payment, our life decisions can change and we won't have to worry as much about money. If we have baby #2 and I suddenly decide I want to go part time, then we can. We also like the idea that if something drastic were to happen, we don't have to worry about not being able to pay the mortgage and losing our house. But hey, we have hundreds of thousands in our investments, yet we're getting foreclosed on. Not something that's worth even chancing it, to us.

I don't think there is necessarily a right or wrong answer here, so whatever makes you comfortable is probably the best choice. I tend to fall into the less debt adverse camp, and we have chosen to put extra money into investments rather than pay down our mortgage. We prefer the possible risk of losing money in the market to the more likely risk of paying our mortgage and effectively losing interest income.

The way we look at it, if something drastically changed our monthly cash flow, we could draw money from our investments to cover the difference. DH has an incredibly safe job, which makes it easier for us to downplay the risk of major changes in our monthly budget. We have chosen not to put all our investment money into restricted categories like tax advantaged retirement accounts and 529s so that we could withdraw money without penalty if need be. I can't imagine a scenario under which we would choose foreclosure and keep our investments.

that would be good for you. If we withdrew money we would get taxed on it as income and the 10% penalty.

Same. So not worth it.

I know everyone has their own thoughts on debt vs non-debt. But I'm anti-risk 100%. There's a risk with having a mortgage, and that risk is to have my home taken away if our life completely changed someday. So many say it's worth keeping for the tax advantage. But I'll give the math on our home. We were able to write off $1,800 in interest last year. However, our mortgage payment equals $4,800/year. Why would we keep a $4,800 expense for a $1,800 tax advantage that we can only take if we itemize (which we do not have enough to do)?

I'd rather pay it off and pocket the $4,800 extra each year, or toss it into an investment.

cbee817 · June 2015

So sorry for you and your family's loss.

brij2006 has good advice, but her mortgage is so small... she can wipe that out and still have $100's of thousands of dollars to invest. GL with what you decide to do.

brij2006 · June 2015

Correct, our mortgage is only $53k (LCOL, bought a foreclosure needing remodeled), but OP said they're nearing their 30s. Even if they had not invested anything into retirement before now, paying off the mortgage would allow them to easily have the extra in their monthly budget to put 15% toward retirement, and fully fund a 529 for each child every year. Getting both of those started now, with 30 years left of working and 2 young children, it will be easy to continue to contribute to those along with saving up for newer vehicles, vacations, home remodels, etc. Paying for all of those in cash.

With a $310,000 mortgage, I'm going to assume having that paid off will mean an extra $3,000 in the budget each month. That's an extra $36,000/year to work with. There's a lot of things you can do with an extra $36,000.

dragonstarjk · June 2015

H and I were just talking the other day about what we would do if we won a small amount in the lottery.

I pretty much agree with everything @hoffse has said. Let that money sit in your account for a month or so. Maybe give yourself $1000 to just splurge on something.

The first thing I would do after that is max out retirement funds. I am not debt-averse, and if you already have a cushy e-fund, then there isn't a lot of worry about what would happen if one of you loses your job. I do like the idea of refinancing to a 15-year mortgage though. We have one and it definitely provides additional peace of mind. As long as it is paid off before retirement, we wouldn't worry about paying it off early.

The second thing we would probably do is decide how much we want to give either to help family members and/or to donate to our favorite local charities.

The third thing we would do is complete some home improvements that we have had planned for several years.

Even if I had any left after those things, I personally would not worry about paying off my mortgage. I would just put the extra away, either invested if that is your thing or just saved up for future vacation plans.

vlagrl29 · June 2015

brij2006 said:

vlagrl29 said:

maple2 said:

brij2006 said:

vlagrl29 said:

Even if it's not your forever home still pay it off. We aren't in our forever home but when it comes time to move then we will just take all the money we get form this house as cash and put it towards the next house.

Same here. This isn't our forever home, but we can make a lot of progress with investing and giving, with the extra month to month cash from a paid for home. Yes, putting that lump sum into an investment may yield more when it comes to math, but we like the idea of knowing that without a mortgage payment, our life decisions can change and we won't have to worry as much about money. If we have baby #2 and I suddenly decide I want to go part time, then we can. We also like the idea that if something drastic were to happen, we don't have to worry about not being able to pay the mortgage and losing our house. But hey, we have hundreds of thousands in our investments, yet we're getting foreclosed on. Not something that's worth even chancing it, to us.

I don't think there is necessarily a right or wrong answer here, so whatever makes you comfortable is probably the best choice. I tend to fall into the less debt adverse camp, and we have chosen to put extra money into investments rather than pay down our mortgage. We prefer the possible risk of losing money in the market to the more likely risk of paying our mortgage and effectively losing interest income.

The way we look at it, if something drastically changed our monthly cash flow, we could draw money from our investments to cover the difference. DH has an incredibly safe job, which makes it easier for us to downplay the risk of major changes in our monthly budget. We have chosen not to put all our investment money into restricted categories like tax advantaged retirement accounts and 529s so that we could withdraw money without penalty if need be. I can't imagine a scenario under which we would choose foreclosure and keep our investments.

that would be good for you. If we withdrew money we would get taxed on it as income and the 10% penalty.

Same. So not worth it.

I know everyone has their own thoughts on debt vs non-debt. But I'm anti-risk 100%. There's a risk with having a mortgage, and that risk is to have my home taken away if our life completely changed someday. So many say it's worth keeping for the tax advantage. But I'll give the math on our home. We were able to write off $1,800 in interest last year. However, our mortgage payment equals $4,800/year. Why would we keep a $4,800 expense for a $1,800 tax advantage that we can only take if we itemize (which we do not have enough to do)?
I'd rather pay it off and pocket the $4,800 extra each year, or toss it into an investment.

Yeah people told me the same thing - don't pay it off because of the tax deduction on mortgage, but it really wasn't that much to begin with. For me I wouldn't have been able to live a life I wanted unless this house was paid off so that's what I did. Our mortgage was $1200 a month and was only paid into for 2 years before it was paid off. and like you said earlier - it has helped me to SAH full time with DD while I work part time on my business and when we have #2 I will most likely stop teaching lessons and only do gigs on weekends. I would maybe not be able to do this if we still had the mortgage.

TNChick · June 2015

So many ideas, and so overwhelming!

A few more details might help. DH makes the bulk of our income (I am the most educated but make the least...isn't that how it works!?). I work in education, and I barely make enough to pay the preschool, but my job is very fulfilling, so I choose to continue working. My husband is currently making a significant salary, but he is commissioned, so that could change tomorrow. Our home is valued closer to $400,000 because we had a significant down payment from a severance from my husband's previous company. So the mortgage is hefty.

I am leaning toward paying off the house. My income could not touch paying the mortgage by myself, and, even though my husband's income has been steady over the years, it is not guaranteed. We have an e-fund that is funded for one year's living expenses. But, like I said, our 401k's leave a lot to be desired. With the house paid off, we are free to ramp up our contributions to the max, and still feel comfortable if something were to happen to his job or one of his major clients. I am comfortable with our current 529 contributions, and I think that we will have enough in those to put both kids through college. We are thinking we will take the remaining $60-70,000 and invest in a mutual fund for retirement.

We really liked your ideas of donating some and maybe even using a thousand or two on ourselves (we are very mm and don't splurge a lot). We also have some home improvements we would like to do (I have been seriously eyeing some granite countertops).

Thank you all so much for your input. We still want to sit down and create a step by step plan once the actual numbers come through, but you all have helped me start thinking of a game plan.

What would you do with Inheritance?

Re: What would you do with Inheritance?

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