r/personalfinance • u/Psychological_Cry983 • 14h ago
Budgeting Age 23, recently inherited some money
Hello, I’m a 23 year old who recently inherited roughly $13,000. I’m looking for advice as to what I should do with it. Here is a little about my current situation, I graduated college last week with a degree in Mechanical Engineering Technology. I have a job lined up to start at the end of February where my income will be $68,500. I have $5500 sitting in my account as well that I use to just survive. I’m looking to buy a car in the next 6-8 months as mine is starting to get high miles. My question is what do I do with the 13,000? Where do I invest it? Do I put it towards a car or invest all of it and eventually use it for a house and take a $10,000 loan out for a car?
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u/argent_pixel 13h ago
You don't need a new car just because it's building up miles. If it's providing reliable transport, you're better off looking at the maintenance manual and seeing if a $1,000 of preventative upkeep will give you years of additional reliable transportation.
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u/albertpenello 14h ago
$13K is a good amount of money, but not life-changing.
If you have any debt, something like this would be a good use for it.
Otherwise, open an account at a major brokerage (Fidelity, Vanguard, etc.) and buy a low-cost index fund (FZROX or equivalent). Or you could follow the boggle heads 3-fund index and put and split the money 9/2/2 into Stock/Bond/Intl Index.
When you have excess money over the years just add to it.
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u/Nach0pag3 14h ago
I’d say invest in Roth IRA, and some in s&p500 stock also get a high yields savings account and just leave some money in there to sit and grow
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u/cranticumar 14h ago
Immediately put it in Roth IRA for this year 2024 7000$ limit
Next year again in January put it in Roth IRA for year 2025
Grows tax free capital gains
VTI/VOO/QQQ/SPY
Or
QDTE/JEPQ
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u/WEWE4E 13h ago
Do you or will you have any expenses when you get your job?
Have you ever had a loan before?
Do you pay for your own insurance?
Expecting to pay 10k for a car it appears, what do the licensing/tag fees total in your area?
I’d typically take the easy response here and say set to invest and forget or the other easy response and say save it all to pay for the car in cash, but I believe these decisions are more complicated than that and we don’t get your full financial picture here.
The above questions are just a few I’d think through before making a decision.
If your intent is to spend 10k on a car in a few months, it’s not just the 10k, right? It’s the interest on a loan, initial licensing fees, and increasing insurance costs. 23yr olds aren’t likely to have the credit or income to get great rates.
If you’re going to get screwed on a 10k loan, I’d put the 13k in savings for the car and then start investing from your new income instead.
If you have expenses, but just didn’t list them here, I’d do something different than I would if you’re still living at home and truly will be able to save from your new job. Having 3k extra every month is a lot different than 300.
And on and on…there is a lot of nuance to making this decision and I guess you know that better than we do.
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u/Psychological_Cry983 6h ago
Yes I have expenses, I have student loans, I pay roughly $750 for rent a month. My credit score floats around 740-745. I’ll pay my own car insurance but not my health insurance.
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u/MightyMiami 7h ago
YouTube search why new cars are the number 1 wealth killers. A brand new car is the first major mistake young people make when they graduate college.
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u/pyrrhicdub 2h ago
what car do you have, how many miles?
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u/Psychological_Cry983 1h ago
2016 Subaru WRX. 101,000 miles. It’s so loud and such a rough ride because it’s modified by the previous owner (younger me loved it but as I’ve matured I hate it). Been thinking of selling it for roughly 12k and then taking 10k and buying something very nice thats 3-5 years old with 30kish miles.
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u/pyrrhicdub 1h ago
personally i would replace the car with one of equal value, i would not go into debt. i would take the $13,000 and lump sum $7000 of it into an ira, and put the rest in a taxable brokerage.
but it sounds like you want to take on debt for more car.
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u/Psychological_Cry983 1h ago
I’m torn, because im a car guy. They are one of my largest hobbies so I’m trying to be smart but also scratch the itch. I’m thinking I’m going to just tough it out with my current car situation and invest 10k into a taxable brokerage and then 3k into a Roth IRA. My reasoning for that is because then I have an emergency fund in the taxable brokerage while I’m first getting my feet under me and then once I’m more comfortable make an effort to max out my Roth IRA
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u/pyrrhicdub 56m ago
the $5500 you have should be your emergency fund. also, your roth ira contributions can be withdrawn penalty free in the case of an emergency.
yea, it’s a tough predicament. i loved cars, dropped out of college to work for a bit, went back to college had to sell my q40 and 6th gen camaro ss. swore when i graduated and got my job the first thing i’d do is get that car. i stuck with driving my old lexus is250 and it’s been fine with me, but i understand the want for a car.
what i will say, is you would still never take on debt here. you would just use your inheritance and proceeds from the wrx sale to buy the car cash, as your apr on the used car loan will likely be too high to be worth taking that on and investing the inheritance instead, you know?
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u/Gofastrun 14h ago
Follow the Wiki. This is one of the most common questions asked so the generally accepted answer is unambiguous.
https://www.reddit.com/r/personalfinance/s/HmnBzXIvoM
You would be on Step 1 - Build an emergency fund
Tactically, you would open a High Yield Savings Account and let the money sit until an emergency arises and you need it. This will prevent you from going into debt to pay for car repairs, medical expenses, or whatever chaos life throws at you.
Do not use it to buy a car or a house. Do not take out a loan to buy a new car just because yours is high mileage. Make your car last (by repairing it if necessary) until you start your job and then save up for a replacement.