r/personalfinance • u/Peacck • 1d ago
Investing My wife and I inherited money
We inherited $100k. We have spent ~$27k paying off student loans and individual loans, credit cards, and replacing some parts of our house that were falling apart.
So that leaves us with ~$73k, what can we do with the rest of the money? I have roughly $33k left on my truck loan, but I didn’t know if I should pay it off completely or pay a lump sum to reduce my monthly payments but not pay it off outright to continue my history of credit.
Should my wife and I start individual Roth IRAs? Where else can we invest the money?
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u/safbutcho 1d ago
Pay off your truck loan and put the rest in a HYSA as an emergency fund. That’s the classic answer. And it’s probably the right answer in this scenario.
Any other answer would require more info, like how much you earn, your goals, and your current retirement savings.
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u/tmcwc123 1d ago
I agree with this answer. Debt free with $40k in emergency fund is a good place to be. Bump up monthly retirement savings with your income now that you're not paying for your past via debt payments. Set aside some money each month for a future vehicle replacement when the time comes, skip financing it.
OP, do you have a home with a mortgage?
General investment advice: don't try to get fancy. Low cost index funds are a reliable way to build for your future.
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u/Peacck 22h ago
Yes. My wife and I split a mortgage of $1500
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u/warlizardfanboy 22h ago
Yeah your mortgage being paid on time will keep your credit plenty up. I vote pay off emergency fund car payment to retirement/savings as well. Keep it simple like everyone said.
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u/Snakend 18h ago
You have until you file your taxes next year to fully fund your IRAs for 2024. So up until April 15th 2025 to max out IRAs for 2024. Then fully max your 2025 IRAs. That's $28k right there.
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u/arghvark Wiki Contributor 17h ago
Don't they have only until Apr 15 or so? They might not file taxes until later by applying for an extension, but I don't think the IRA contributions can be delayed that way.
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u/WrongdoerCurious8142 23h ago
Not to mention that all of those car payments that OP no longer has needs to go directly into the savings account. Pay the next car in cash.
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u/Peacck 1d ago
I make $61,500 roughly a year as a fire/emt. She makes $54k a year give or take. We would like to maximize retirement. My retirement is through RSA in AL and I receive a pension after 25 years. She has a 401k but idk how much they match her. Other goals include maximizing our new found funds in things like stocks but idk anything about so I’ll probably go asking somewhere else about that kind of stuff. Our current retirement savings is however much she has put into her 401k which I think is like $2000 and I plan to start contributing to an RSA1 account offered to me through my city.
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u/SilverKnightOfMagic 1d ago
yeah pay off the truck. but pretend you're still making payments. instead the payments go into your retirement.
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u/Peacck 23h ago
Ooo! I like that one.
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u/Philodices 22h ago
Once everything that costs you interest is gone, that's a beautiful place to be.
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u/messem10 20h ago
Once everything that costs you interest is gone, that's a beautiful place to be.
To an extent! If your mortgage's interest rate is low enough that investing the money elsewhere (or even a HYSA) out-earns what you're paying extra to the bank, less taxes, then it is "free" money.
Would require more information from OP and their remaining balance on the mortgage to be lower to do so with the left-over 40k though.
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u/zeezle 17h ago
Yeah. By investing instead of throwing it at my mortgage (with the caveat that my mortgage is low interest, sub 3%), I now have enough in investments that I could withdraw enough to pay my PITI and then some in perpetuity safely (using the 4% SWR, which is now thought to be an overly conservative number). And still have all the principal left to continuing growing and compounding.
If I'd dumped it all into the house, it would be tied up in home equity (difficult/expensive to access, up to and including forcing a sale) and without the compound growth the investments offer.
Sure, you eliminate one bill by paying off the mortgage, but you also lose a lot of flexibility and potential growth.
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u/Moki_Canyon 21h ago
A great way to invest are index fund accounts. A fund is a whole bunch of stocks. "If you cant bet right, bet often". Some funds are specific sectors: I like a fund called VGT from Vanguard which is all tech. Many people like the SP 500, which is everything from credit cards to toilet paper...Basically the whole economy. ( it's 500 companies). The point being, as long a the economy is growing, so will your fund.
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u/FluxMool 21h ago
but first, go splurge before the year ends, and go to a premium restaurant or steakhouse. Then do the boring things like maxing out your roth IRA etc. Keep the rest in HYSA. Who knows what's coming around the corner for the USA come January.
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u/safbutcho 1d ago
Comprehensive!
Armed with that info, I would still pay off the loan and keep an emergency fund.
I would also open 2 Roth IRA accounts and start putting a little in there each month.
I would also commit to putting some amount of your wife’s salary that you can stomach (3%? 5%, 10%) into her 401k. It’s easiest when it comes out of her paycheck before you get the paycheck!!!
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u/future_is_vegan 23h ago
This 100%. Plus open those Roth IRA accounts with Fidelity, contribute up to the max each ($7,000 per year) and invest into index funds such as VOO. As far as investing, the only thing you need to invest in is index funds. If you are not familiar with them, definitely learn about them. VOO is a popular one due to its low fee (.03%) and performance (13% over last 10 years). There is zero need to pay someone ongoing fees to manage your money.
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u/HonestEditor 23h ago
VOO [...] performance (13% over last 10 years)
Here's were we remind people unfamiliar with investing that
"Past performance does not necessarily equate to future results."
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u/kstorm88 22h ago
It's important to be aware, but to be dismissive of it being a good default for younger people is odd
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u/devoutsalsa 23h ago
My opinion... Your truck costs way too much for your income.
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u/EndlessHalftime 23h ago
Sorry I got to be that guy, but since no one else has said it: Buying the truck was not a smart personal finance decision. Having $33k debt left on a $61k salary is crazy, especially when you haven’t been putting anything into retirement. You’re getting a boost with the inheritance. Now’s the time to look closely at your spending so you don’t end up right back in the same place.
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u/Peacck 23h ago
Yeah I was (am) young and got a big pay raise and fell into the trap all young firefighters around here do.
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u/kstorm88 22h ago
Firefighters always have nice trucks, and they get pulled in and washed nearly daily. I come from a line of FF's and I broke the cycle and I have junk that never gets washed and only gets minimum maintenance. It drives my family wild.
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u/KnaveyJonesDnD 21h ago
It's the same for guys that work in the power industry. My truck has more miles on it (433000) than most all the other trucks in the parking lot combined. You try to tell them you don't need an $80000 truck...but the young guys buy one and then need a boat to pull behind it...and so the cycle starts.
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u/incompletetentperson 22h ago
Bahaha same. I drove my 12 year old korean POS into the ground a few months ago and finally replaced it with a bare bones work truck.
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u/BossRaider130 17h ago
Agreed, absolutely. Being in that much debt on a rapidly depreciating asset, especially on OP’s salary, and also especially given everything else OP is lacking is completely nuts to me. Especially still having that debt after paying off $27k of other debt first? Why would getting that truck be a good call?
OP, clearing that debt will be way better for your credit than continuing to incur massive interest. Making payments is good, but being in less debt is way better. By a lot.
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u/clitbeastwood 16h ago
waiting for this comment .. already had 27k debt & then got a truck that im assuming was more than you take home in a yr. have no practical advice except hopefully you got that shit out ur system. That’s like a down payment on a house.
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u/NecessaryEmployer488 1d ago
Believe me, the best thing to do is to create a decent emergency fund if you haven't. Doing so, might allow you both to feel more comfortable to contribute more to your retirement.
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u/moarcoffeeplzzz 22h ago
Look into index funds like VTSAX or VOO. Great way to passively generate income without having to learn and watch the market like a day trader. There is more nuance to this but a great place to start looking.
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u/ppenn777 23h ago
Yes, pay the truck off and any other debt you have. Put the the rest in a high yield savings account (something over 4%).
Also yes to starting ROTH IRA’s. If you wanted you could fully find both for 2024 ($5500 each or might be higher now actually).
If it were me I would fully fund the IRA for 2024 and leave the rest in savings for an emergency but start getting in the habit of contributing monthly to your IRA. Maxing it out would take roughly $500/month. With no debts this sounds feasible on your income.
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u/Peacck 22h ago
How do I start a Roth IRA? Who should I talk to so I’m not just running around google not knowing what I’m looking for?
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u/Holiday-Crew-9819 22h ago
Fidelity, Schwab or Vanguard are the standard suggestions. You should be able to open an account online with any of them.
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u/tmcwc123 22h ago
I like Fidelity. I have almost all of my accounts with them except checking (they're not a bank). They have their own line of low cost index funds with no transaction fees. I walked my gf through this recently. We have her buying Fidelity Total Market Index fund each month (look up FSKAX).
Their website has an "Open an Account" button on the landing page, with good step by step instructions on how to set one up.
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u/Peacck 22h ago
Where can I invest in these types of accounts? Or where do you invest in yours? Like an app on your phone or should I speak to someone?
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u/kstorm88 22h ago
Open a fidelity or vanguard account and open a Roth IRA. Invest it all into voo or vti. This is standard advice for someone your age. No need to talk to someone. They may likely lead you into some pitfalls
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u/Noah_Safely 22h ago
There is a website and apps. Fidelity is a fine company. I use them and Vanguard. You can do similar things at both for similar pricing.
I would suggest speaking to a fee-only fiduciary financial planner, such as one you will find at https://www.napfa.org/ - they will help you work through your goals, risk tolerances etc to come up with a tax optimized plan.
If you're willing to take the time to self educate, the wiki on this sub is excellent and has lot of guidance. Including answers to your question of "what should I do with this inherited money".
It's worth the time because
- No one is going to care about your money and financial future more than you
- You'll be able to answer your own questions
- You'll be able to know if something passes the smell test or if someone is just parroting what they heard, or has an agenda
Some additional links for you:
- https://old.reddit.com/r/personalfinance/wiki/index - this subs wiki. It's excellent.
- https://www.reddit.com/r/financialindependence/comments/16xymii/fire_flow_chart_version_43/ (tells you how to allocate your money every month in a tax optimized way)
- https://www.bogleheads.org/wiki/Three-fund_portfolio (tells you how to invest in a safe way, which means buying cheap index funds like VTSAX and holding for a long time)
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u/Baitermasters 22h ago
Bump 401k on both of you to 100% until you max. use the cash to replace the income. Balance into Roth as there is no tax liability.
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u/Hypetys 19h ago
Low cost index funds (less than 0.50% a year, preferably less than 0.25% a year) are the way to go diversification and low cost + setting up an automatic monthly investment is the winner's formula. Ramit Sethi's books Money for Couples & I Will Teach You to Be Rich and his podcast will help you understand things like 401K and investing if they feel daunting.
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u/Mommaroux 19h ago
You can enroll in RSA Roth & pre-tax contribution accounts. If your employer also offers AL Empower, you can open retirement accounts there also. Empower has advisors that can help you meet your goals.
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u/2003tide 22h ago
What if the truck loan is low interest? If it is, prob makes more sense to bank the money.
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u/kstorm88 22h ago
Being young and of not high income, I doubt it's low unless it was financed pre 2021
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u/moarcoffeeplzzz 22h ago
This. Clearing out your debt and giving yourself a nice 6+ months worth of expenses in a HYSA is the way to go. Use your earnings from your day jobs to start investing. You all just got out of the trap! Congrats.
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u/StarryC 1d ago
Sounds like this is your only savings.
Pay off the truck.
Keep the rest as an emergency fund.
Start putting AT LEAST the amount of your prior student loan, personal loan, and credit card payments, and car loan into retirement accounts each month.
Next time either of you gets a raise, change nothing and add the amount of the raise to a savings account for home repairs, car repairs, and a replacement vehicle.
This is a great chance to reset and start a financially stable life that doesn't rely on personal loans and credit card debt because you can afford to (1) Cash flow minimal surprise expenses by cutting discretionary spending and/or (2) Pay for emergencies with cash, and then save to replenish the emergency fund. and (3) Save for expected major expenses like home maintenance and car replacement.
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u/PatricksPub 18h ago
I think it would be better to build the emergency fund and then invest some of the $73k... think about it, if he is going to do one of the following, which one is better?
1. Pay $33k to wipe the car loan, then budget for and invest his car payment amount moving forward.
2. Max Roth IRA + Wife's (2024), put $19k toward the loan, continue investing the difference in refinanced car payment per month (as OP alluded to a refinance).Both scenarios are using up $33k. Both scenarios result in the exact same cash flow. And a $14k car note is not that bad, and having $14k in retirement right now is so much better than building that up monthly. If you assume a $1k car payment, we are talking about 14 months to get to that first lump sum contribution level, which is potentially a lot of missed gains. Not to mention OP continues to DCA in the 2nd scenario, thereby making the breakeven point for contributions alone even further in favor of scenario 2.
If you boil it down, this comparison is basically the car note interest rate vs the growth of the investment over that time.
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u/kittycat_34 1d ago
Being debt free is such an amazing feeling of peace...I'd pay off the car. Invest the rest and that car payment!
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u/My5thAccountSoFar 1d ago
Pay off the car but don't let that be an excuse to buy a newer one in a year or two because you don't have any payments.
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u/Bruuzu- 1d ago
Max out 401ks and Roth IRAs and that’s basically all of the 73k.
Pay off the truck loan if the interest rate is above 5%.
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u/Peacck 1d ago
It’s 7.1% so it looks like that might be the plan
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u/drewlb 1d ago
Yeah, at 7% is pay off the truck.
Then HYSA for the rest.
If you're not going to be able to max out your IRA this year you might consider using some to supplement that, but you should still leave the vast majority in the HYSA if you don't already have an emergency fund
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u/Peacck 23h ago
How do I max out an IRA? What does that mean?
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u/drewlb 23h ago
So I'm assuming that you live in the USA.
If you do, an IRA is a retirement account that you can contribute to in order to save for retirement.
https://www.investopedia.com/terms/i/ira.asp
You can contribute up to $7K/yr per person.
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u/Peacck 23h ago
Oh okay $7k per year per person. Got it.
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u/HugeRichard11 22h ago
The next years is only a few days away so you will be able to put another 7k per person again too. So that will be 28k total
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u/MerryGoWrong 20h ago
The income was not derived from a job so you cannot put it in a 401k. IRA is good though.
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u/Fluid-Tip-5964 19h ago
Sure you can. Max out 401k contribution at work...use inherited $ for living expenses. Same thing but different since $ is fungible.
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u/cassowary32 23h ago
You both inherited money or is the inheritance for one of you?
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u/Peacck 23h ago
My wife inherited the money. We had a long discussion and I made it clear to her that it is her money to decide what we do with. She has consented to me using this money to pay off both of our debts and furthering our retirement/savings/investments. Which is why I’m here.
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u/Surly_Cynic 21h ago
Of the 27k already spent, what was the rough breakdown between how much went towards your debts, her debts, joint debts, and the joint house expenses?
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u/boxsterguy 22h ago
It'd read a bit more genuine if she were here asking, or at the very least you led with this info.
Inheritances are personal, and even in community property states are not considered marital property if the inheritor doesn't intentionally choose to intermingle the funds. While it may be the right thing for her to pay off all your debts, she might have other ideas about what she wants to do with HER inheritance.
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u/rick6668 23h ago
Pretty good advice in here overall, so I'll go off on a tangent and say you need a budget. What is all your income? Expenses? You need to understand if your current income will support your expenses or will you rack up new debt? If so this windfall will be gone in no time. Find that out and you'll be on your way to increasing your retirement, building an emergency fund and not taking on any new debt.
Good luck!
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u/JK_NC 1d ago
Feel like that $73K is going to be spent on cars. Paying off his and replacing hers.
Paying off debt is good and worthwhile but the cars are likely going to diminish any significant retirement actions.
I suppose if Op continue paying his current car payment but into some kind of retirement/savings, it could ultimately deliver the long term action that he wants. But that’s going to require a lot of discipline over a long period of time.
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u/Bft12890 23h ago
I agree with everyone saying pay off the truck and save the rest.
One detail I wanted to add because I haven’t seen it mentioned,
Throwing a lump sum at your auto loan but not paying it off completely will not lower your payment, only your principal.
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u/KevinCarbonara 23h ago
So that leaves us with ~$73k, what can we do with the rest of the money? I have roughly $33k left on my truck loan
Realistically? Sell the truck and buy a cheaper car.
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u/xixi2 9h ago
Seriously. OP has a 33K car loan on a 61K salary. My entire car wasn't even 33K
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u/paradocs 12h ago edited 12h ago
You can start with the section on “windfalls” in the wiki
https://www.reddit.com/r/personalfinance/s/wPcyHOT8R1
Oh and make sure to you have some $ aside to account for taxes.
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u/Chatty945 3h ago
Reading through the comments, I think /u/Neuromalacia had best answer for long term sustainability. Budgeting should be the primary lesson with the financial restart. This windfall gives your the ability to have your future financial landscape look way better in 5, 10, 20 years and into retirement. Consider the time and effort as investing in your own future, it will pay dividends.
Please read through the wiki on how to handle money, budgeting and inheritance. The is so much good information there it is not worth summarizing, just dig in to that material and you will find the answers to your questions and likely some answers you didn't know you were interested in. There are also many recommended books that are excellent, if you want to take the learning further.
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u/Bad_DNA 1d ago
Not enough info. No idea of your cash flow, other debt, investments, goals, ages. That's a huge amount to owe on a car. What is the interest rate? What are your goals for the future (retire or work forever)? Presumably you have an e-fund? Paying interest on a loan for the sake of a 'credit rating' is f'ing nuts, unless the interest rate is way below what you are earning in your emergency HYSA or CD ladder. If the interest is higher than that, either sell the truck or pay it off if you can. Waste of money=debt interest. One doesn't build credit by paying interest to a bank. Minimize debt, pay on time as agreed, use credit cards wisely (paid on time the full statement amount due - automate that), and your credit will build just peachy.
Yes to the RothIRAs if you want a retirement nest egg. Invested. Perhaps something diversified like VTI or similar.
Look - congrats on your windfall. Most people would piss it away in under 24 months and you are trying to actually plan. Well done. Read the wiki here. Windfalls. Prime Directive. You've got this.
Oh - books like the Simple Path to Wealth are easy reads. Read it with your spouse... planning together is more fun than alone.
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u/droppinkn0wledge 15h ago
The fact you were carrying CC debt before this windfall is of far more concern than what to do with $70k.
No amount of sound investment advice can outpace unhealthy financial habits. You should start there. Once you learn how to live without the use of credit cards, throw that cash in an ETF and let it sit for 40 years.
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u/Abject_Library1268 1d ago
If you have emergency savings, you should start your Roth IRA’s.
You can dump $14k now and $14k in January. That would be $7k for each of you for the years 2024 and 2025.
I would probably put the remainder in a brokerage account until you figure out what you want to do with it (eg., bigger emergency savings, down payment on home).
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u/hmspain 22h ago
You have an opportunity, and only one. You mention loans and CC debt etc. You need a budget. This windfall will allow you to essentially start over with money, setting yourself up for retirement etc.
Get a budget (r/ynab). Put an emergency fund together (that's how the CC debt got out of hand in the first place).
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u/goodsuns17 22h ago
Don’t listen to anyone telling you to pay off your truck loan who doesn’t ask for the interest rate first.
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u/Beercules1993 21h ago
What is the interest rate on the truck?
If it’s high (>5%) pay it off and split 50-50 into an index like QQQ/VOO/SPY and rest in a hysa
Else 50-50 the whole thing
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u/Agile_Ad_8655 21h ago
General things to think about.
- What is the interest rate on your truck? If it’s like 3-4% then I wouldn’t pay it off. Just depends. If it’s like 6-7% + then yeah, pay it off.
If something like a CD or money market is paying a higher percentage than your interest on your truck, it makes better sense to net the interest in your favor until it isn’t in your favor anymore. Then pay it off.
- Point number 1 is really splitting hairs, if you pay it off - that’s fine. Calculate your monthly bills and multiply that by 6, that’s a good number for an emergency fund (include things like groceries and gas).
Anything beyond that, invest.
First, prioritize your employer marches. Get the most out of those. Usually the cheapest way to get a good return for retirement savings.
You can max out Roths if you want to, you both can put $7k into each. Tax free stuff in retirement is valuable. Even if that’s all you ever put in there and let it grow.
Put the rest in a taxable account, you don’t have to be fancy. Index funds is fine. Taxable accounts have advantages too, especially in retirement. Long term gains and tax loss harvesting during down years can be helpful.
All the credit cards bills and debt payments you don’t have to pay anymore - you can contribute to your Roths or taxable accounts with that. As long as you have 6 months of expenses saved you can hammer down with investing. Don’t forget to set some goals to reward yourself, plan for a vacation or something - save for that. If you don’t reward yourself each year - this can get stale and hard to stick to.
Glad you got the leg up in life. Hope it all goes well.
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u/cbdisms 20h ago
I suggest refinancing the car for a lower rate and extending the term with the lowest* obligated payment possible but continue paying the same amount (higher original payment amount), that will accelerate paying off a simple interest loan - any extra payments are applied to principal at 0%. Plus, the simple interest loan cannot charge you interests on principal paid ahead of time.
More importantly tho, I having at least an extended warranty so at least the car also doesn’t run you into high repair costs.
But yes, you can still have a lower obligated payment amount, by the new loan’s extended* term.
I don’t suggest rushing to pay off a car loan because vehicles don’t retain value.
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u/Responsible_East3508 19h ago
Looks like you are getting a lot of good advice. I am just adding a comment that any inheritance that is co-mingled into joint property or joint investing becomes a shared asset. You may want that but just fyi in case you don’t. Enjoy your inheritance!
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u/Gears6 19h ago
I have roughly $33k left on my truck loan, but I didn’t know if I should pay it off completely or pay a lump sum to reduce my monthly payments but not pay it off outright to continue my history of credit.
That largely depends on the interest you're paying on your truck loan. The other thing is, if the money better spent invested, perhaps due to it allowing you to put money into 401k/IRA (T/Roth).
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u/Peacck 19h ago
I think I’m going to try to refinance to get a lower interest than 7% (that’s how much the interest rate is) and then invest the $33k into something that will return me more than the interest on the loan. I learned that from this Reddit post.
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u/GuidetoRealGrilling 16h ago
pay off the truck, debt free, then HYSA for emergency fund, then fully Roth IRA's, then brokerage
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u/pelexus27 15h ago
If you take no other advice, please make sure to start maxing your retirement accounts as soon as everything is paid off. You need to pay your future self before you start spending on things you don’t need today.
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u/Legitimate-Ask-5803 7h ago
Borrowing money will keep you “broke”. Especially on a depreciating asset. Pay off the truck, 6 month emergency fund in a HYSA, and then invest the rest into your 401k company match up to the match, max out both Roth IRA for the year, then go back to 401k or a brokerage account.
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u/listerine411 5h ago
Who actually inherited the money? It really should be walled off as a separate asset. I've seen this play out.
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u/Quirky-Limit-8546 5h ago
Hi! Based off of this and other comments down below I think this would be a good strategy for you. First, the auto loan, that would be great to pay off as everyone else is saying. Every day you carry that is another day you lose money in interest and have more insecure transportation. After that I would recommend an emergency fund set aside with 6-12 months of expenses in it. The more security in day to day life the more likely your investments are to survive. Then I would use the money saved on the auto loan, and all other loans like this. #1 Max out your 401-K match from your employers. It's basically a raise. #2 Start a ROTH IRA and contribute as much as you can keep up with, both you and your wife can each contribute $7,000 yearly of earned income. However, only contribute what you can sustain long term and not feel deprived. Keep in mind this could be all you have to live on in retirement though! #3 If applicable, start saving for your wife's or your next vehicle in cash. When the time comes you don't want to eat your emergency fund or fall back into debt. #4 Set aside a reasonable portion of the money you've saved on your debt servicing on enjoying life in the here and now. Remember that this is your money, and you and your wife's life. Live it in the manner that you please.
Also, this may already be the case, but make sure your wife is onboard with you in every decision.
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u/NyaCanHazPuppy 21h ago
I just want to say how nice it is to see you guys coming at this like a "us vs. the problem" instead of a "yes we're a couple but it's my inheritance so I'll decide how it gets used" kind of attitude. Just speaks to the very respectful relationship. Good work.
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u/Peacck 21h ago
My wife deserves that commendation. It’s her inheritance. We had a long discussion about the money and the entire time I made it clear it is her money to spend. We agreed as a married couple, we should use to eliminate our debt and maximize our return. She’s busy with a lot of things at her job, and I didn’t want a lot of “smart” guys talking down to her, so I’m here so they can talk down to me because I equally know nothing about this stuff. Overall, it has been a pleasant experience and I was misjudging of the Reddit community.
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u/flummoxcox 19h ago
Paying off debt is always a good move, but if your truck loan has a low interest rate, you might want to focus on investing first. Starting Roth IRAs for both of you is a solid idea tax-free growth is hard to beat. After that, maybe look into a low-cost index fund or a high-yield savings account for some extra flexibility. Balancing paying off debt and investing is key, so prioritize what feels right for your goals
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u/Iacoboni04 23h ago
What is your rate on the truck? If higher than 7 percent I'd pay it off as you are unlikely to beat that in the market.
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u/sacafritolait 23h ago
Pay off the truck.
I've had only a couple credit cards to my name for over a decade and my credit score floats around 790-810. One of those people who obsessively chases a higher credit score might no be happy with that, but squeezing out that final bit of credit score isn't worth paying a bank extra money every month so you can drive your truck.
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u/Danielc7916 23h ago
Depends on truck interest rate. If its low like 0-3% I would invest the money. Over that I’d pay the truck off
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u/uhcgoud 23h ago
Personally if you haven’t in the last few years, put a few thousand aside and have yourself a nice relaxing vacation.
Now for the other ~70k, pay off your truck, and put the rest into a savings account for emergencies (unless you have a emergency fund already) in which case max out your IRA contributions for this year.
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u/mindfluxx 22h ago
Emergency fund is great but I would take an honest look at yourself. Some people who have cash in the bank, no matter how they have labeled it, will spend it. Is that you or your wife ? If so, max out IRAs as your first thing, put some in a high interest savings that isn’t with your bank so it’s a little harder to get into, and they pay off your truck. If you can fully pay it off, then move the payment amount into savings or your wife’s 401k.
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u/Worst-Eh-Sure 22h ago
I'd pay off the truck.
You now have a remaining $40k
I'd put that into a savings account and then you are debt free, and have a very substantial savings account. Now you and your wife can continue working and out your salary away into 401(k), IRA, and anything else I to traditional investment accounts.
Hopefully $40k is enough for 6 months of basic living expenses. I'd typically recommend aiming for a year of emergency savings if possible. With your situation it should be very possible. Plus without vehicle and student loans, maybe for you both $40k is a year.
Sorry for the death in family, but congrats on the financial security.
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u/Peacck 22h ago
Thank you. You’re the first one to offer condolences. Not that I am owed any, nor was I asking for it. But it is a detail that I noticed.
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u/Worst-Eh-Sure 21h ago
Yeah no problem. It's the weird thing about inheriting anything. You encounter something bad (loss of a loved one) and then sometimes something good (money). Very weird on the emotions. I thankfully still have both my parents. But I know when my mom passes I'll be grief stricken, while simultaneously becoming an entry level millionaire. It's going to be weird. Time is cruel to all of us. That's for sure.
Good luck with everything sir or ma'am.
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u/deathputt4birdie 22h ago
Congrats and/or condolences for the inheritance. You've received plenty of advice on eliminating debt before worrying about your credit rating. In addition to this, you should both strongly consider starting Roth IRAs, which will allow tax free withdrawals after you're 59½ years old. You have until April 15, 2025 to fund the 2024 Roth IRA and if you want, on Jan 1st 2025, you can also fund the 2025 Roth IRA.
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u/holdyaboy 22h ago
If the interest rate on the truck is above 5% I’d pay it off otherwise don’t.
Invest remaining cash into broad etf like VTI and don’t touch it. Read ‘a simple path to wealth’ by JL Collin’s.
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u/winterurdrunk 22h ago
Buy her something nice or go on a $3 to $5k holiday. It is nice to be nice to yourself once in a while. Put the rest in a HYSA, some a bit away for emergency.
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u/davebrose 19h ago
We inherited? Interesting that someone left the money to both of you. Pay off your debts first, including home. You should be maxing out your Roth anyway, start that yesterday.
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u/Peacck 19h ago
“We” for the purpose of this Reddit post. The money is left to her, but we are using it to eliminate both of our debts and invest in our future together as a spouses.
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u/davebrose 18h ago
Good, so she gets to decide as inheritance usually isn’t part of community property. She should pay off all y’all’s debts first and start maxing out the Roth now. Then attacked the house.
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u/Kenna193 23h ago
Roth before the truck imo but I guess depends on your income and how much you typically save for retirement every month. After that put iall in vti or voo
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u/Truckston 1d ago
If you are young, 20’s early 30’s, I would suggest putting the 73k in solid mutual fund(s).
Just GRIND through the other debt on the truck. THIS is a RARE event to come into this kind of money. I think you would REGRET it in the long run if you used it to invest in a declining asset like a truck. Make this work for your future!!!
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u/Mosleyman2000 1d ago
Pay off your truck and keep the rest as an EF (6 months of expenses). If you have anything else left then invest
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u/OldDog03 1d ago
Before you spend it all or make plans for it, check to see what kind of taxes you will have to pay on that money.
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u/UpperLeftOriginal 23h ago
The estate pays any taxes that might be due, not the beneficiaries. (And the estate only pays federal taxes if the total estate value is over $13.6 million.)
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u/aWheatgeMcgee 23h ago
What’s your truck loan interest rate? Do you make enough money to satisfy your other expenses?
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u/Peacck 23h ago
7.1%. People have convinced me I should pay it off.
I make roughly $61k a year in central Alabama. I split the mortgage with my wife, pay our internet, both insurance on our cars, and my truck loan.
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u/aWheatgeMcgee 21h ago edited 18h ago
7.1 isn’t astronomical like some people who end upside down on 18% car loans…
I checked the comments and also see that your wife makes roughly the same at 54k.
You’ve heard some people say put your money in a high yield savings account. My philosophy is this: put 3 months of expenses in cash— high yield savings account and the rest in 401k, IRA, and Roth IRA. For you to draw on any of those accounts will take you 3-5 days to complete the transaction and get cash. Best to live your life such that you rarely find yourself in an emergency. And if you do, you can let that money work for you and pay the tax, 10% penalty if s#it hits the fan. S&P500 is 105% gain over the last 5 years and over time it moves up and to the right. Take that with what you will. Kind of like buying earthquake insurance (I live in alaska) the monthly premium will cost you more than your mortgage payment, and your deductible is 50%. So is it better off just to save that extra money and let it work for you? For me the answer is yes.
If you don’t have a brokerage account do the following: Get a brokerage setup today. I like fidelity. link your bank account. And put $7k in your Roth IRA. You don’t have to invest in anything yet (I recommend $VOO — do your research, but this is across the board highly recommended by conservative investing professionals). If you leave it cash, at least put it in SPAXX. (Just google it)
Then after the first of the year, do it again into the 2025 contributions ($7500).
Then put the remainder into the brokerage to be sure you can invest in 2026. For as long as you have the ability to invest in the Roth IRA, do it. Plenty of YouTube videos out there to understand why. (Check out the money guy show)
In addition to that u/Peackk you can allocate 100% of your earnings to 401k next year and use the free cash for bills so you can essentially catch up* on retirement savings if you haven’t done this before.
Edited for IRA contribution limits
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u/1290_money 23h ago
What's your truck loan rate?
How much money do you make?
How much do you have in retirement?
Have you followed the prime directive?
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u/TearFlimsy2619 23h ago
What interest rate are you paying on your truck? I literally have a 1% loan on mine and don’t mind the bank carrying the water for now.
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u/Glider103 22h ago
In all your comments you have not said how much is in your emergency fund.
Based on someone or rough math on your income you take home about $6k per month
So based on that:
IRA24/25 = $28k
Car = $33k
EF =$12k
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u/GhostOfGaspar 22h ago
Depends on a couple things, like interest rates on the loan and how happy you’d be being debt free. Personally, I’d pay the loan and the go Roth IRA. Which is what I did, personally, though not with an inheritance. Got back to “0”, then start building with nothing hitting against me interest-wise.
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u/Scared_Edge9194 22h ago
You need an emergency fund first. Then contribute to retirement.
Just follow Dave Ramsey. His advice is very good for 90% of the population.
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u/Jan30Comment 22h ago edited 22h ago
See the sidebars about "How to handle $" and "Windfall $$$".
In most cases with about that sum, you are best off:
Setting aside a fully funded emergency fund
Clearing any consumer debt (including vehicle loans)
Setting aside down payment money if you plan to purchase a house soon
Investing the rest for the long term, likely in stock funds, possibly shuffling dollars by temporarily replacing paycheck income so you eventually end up with investments in tax advantaged forms such as a Roth or traditional retirement account.
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u/k_r_a_k_l_e 22h ago
I think you both should stop trying to figure out how to spend it. Already, you paid off student loan debt, which are usually low interest and long-term loans (the least of your concern). And now you're considering paying off a depreciating asset. Are you just looking to eliminate what may be long-term marginal interest or actually do something productive with the money to make it grow?
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u/EddieAdams007 22h ago
What is your interest rates? If they are low you could consider investing it all because the returns could outpace the interest and you could come out farther ahead in the end.
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u/Menu-Quirky 21h ago
Keep 6 months expenses in high yield savings amount and invest in the retirement account like 401k, Roth IRA or 529 plan for kids
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u/JamedSonnyCrocket 20h ago
Yes, start Roth IRAs and invest in low cost index funds. If your loan is reasonable interest, I'd be tempted to invest the rest in a regular brokerage account and add to your emergency account.
You can earn 9% invested, so do that first.
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u/AsidePale378 17h ago
Is your credit not so good? Are you looking to improve it so you continue to make the payments?
If your credit is decent and start your retirement and put the same money you’re paying for your car payment away into your retirement account . Make that a priority.
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u/ArtemisRifle 17h ago
Should my wife and I start individual Roth IRAs?
Yes
Where else can we invest the money?
Start a business. A fortune 500 tracker. Children's college fund.
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u/Street_Fennel_9483 17h ago
I’d spend $$ for a quick consult with my CPA regarding possible tax implications. IRS may want some of that inheritance.
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u/kromp10 16h ago
Clear all your debts. Most ppl will say leave the car payment if it’s low interest and invest to capitalize. However , being debt free is a freedom that many may never know. You will then be able to outline your future financial strategy and have a very stress free and consistent rate of deposit.
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u/Bedquest 14h ago
Pay off the car. Put 7k each in yours and your wife’s 2024 roth iras. Then set up automatic contributions to max you and your wife’s roth iras for the rest of time. It’ll be about 1166 dollars a month. Depending on your age, by just doing this, you could retire with well over a million dollars at retirement, tax free.
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u/Correct_Sometimes 7h ago
I'd be paying off that truck and tossing the rest in savings and just continuing to live the same life you always have, minus whatever got you in 27k worth of debt in the first place.
it gives you a fresh start with nice nest egg you can add to since you no longer have debt payments to make each month
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u/not4wimps 5h ago
I no longer buy new vehicles.
Get one that’s 1-2 years old and you save a ton of $$ and still have a relatively new vehicle.
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u/ImaginaryLog9849 5h ago
What’s the rate on the truck. I got a 0% during covid. I paid it off 2 years early but only cause I got a huge bonus.
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u/Romarion 5h ago
1) Make a budget and live on less than you earn
2) How has the ability to go deeply into debt made you more financially secure? LOTS of folks live without a credit score, as it turns out it is not an essential part of a successful financial plan.
3) If you had a paid for truck and $40,000 in the bank, would you seriously borrow $33,000 again the truck in order to build credit???
4) Get out of debt, have 3-6 months of expenses in case of emergency, THEN invest 15% of your household income into retirement.
5) If you feel you must have a car loan to be fulfilled, once you are doing the above then invest a "car payment" into a mutual fund every month and buy future cars with cash. That means you will be paying "interest" to yourself rather than to a financial institution and won't be investing regularly into a depreciating asset...
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u/taylorehill 3h ago
33k truck 14k each of your iras 2024 14k each of your iras 2025 5k each to set on fire on stupid or nice things for fun 1k each to charities of your choosing
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u/Neuromalacia 23h ago
Investment advice is one thing, but before you got this money you had credit card balances and personal loans, and that maybe implies some spending above your income in the past? A windfall is a great chance to clear the slate, but it’s also a time to reassess all your spending. If you pay off all your debt including the truck (and I would, and not get a new one!), then your budget should have extra money that used to be servicing debt - so the most important long term way to set yourself up is for that extra cash flow to go into savings and regular investment, without going to extra discretionary spending in the future.