Sorry for any formatting errors, I’m on mobile.
I recently found out that I’ll be receiving about $30k from a settlement and was hoping to hear from others what I should do with that extra lump sum. My current finances are:
Car loan: $21k remaining @ 5%
Student loan: $70k remaining @ 4%
Total monthly expenses: $7,000 (includes rent, bills, car, student loans, 401k, food, etc)
Total leftover monthly: $2,000 (currently going into a HYSA)
Current amount in savings: $20k
My major considerations are my wedding in a few months (should be covered, but it will mostly drain my current savings) and my fiancée’s and my desire to eventually buy a house/condo and have kids. We’re both in our early thirties so we’re aiming to have both of those in the next five years.
$30k is really not that much in the grand scheme of things, and I’m leaning towards that being our emergency fund while we begin saving in earnest towards the house down payment.
Is there something else I’m missing or not taking full advantage of? $30k ends up being about an entire year’s worth of savings for us, so to receive that all at once is quite jarring.
Thanks for reading, and I appreciate any input.
Had a small windfall, looking for advice on how to allocate it
byu/Soulfighter56 inpersonalfinance
Posted by Soulfighter56
6 Comments
https://www.reddit.com/r/personalfinance/wiki/commontopics
If a wedding is going to drain your $20k in savings and that savings, in reality, is also your emergency fund, put the $30k in the HYSA and reserve it for emergencies. Not for vacations, not for gifts, not for wants. It’s for emergencies. Even then, you’ll be short of a 6 month emergency fund. Read the Wiki linked on this page and follow the flowchart. Good job on taking advantage of your 401k plan and being able to put $20k aside even if I don’t agree with using all of it for a wedding.
I would keep it in savings until after the wedding.
At that point, once you’ve combined finances, do a collective review of open debt, desired emergency fund balance, etc – and see what the best use of any “leftover” post-wedding amount is, if any.
Read the BH guide to [windfalls](https://www.bogleheads.org/wiki/Managing_a_windfall), plus the guide in this subs wiki. Then, based on understanding both of those, make your informed decision. As long as you spend the time to understand the ramifications of each option, your choice will be a good one.
It sounds like your emergency fund is really a wedding fund.
So I’d just stick the 30k into a HYSA and make that your new emergency fund. After life settles down a bit after the wedding and living on a combined household budget, then consider which debt you’d like to out somemof the 30k towards.
Allocating the $30k to your emergency fund is a brilliant move, as your current $20k savings will soon be depleted by the wedding. With monthly expenses of $7,000, a $30k fund provides a solid 4-month safety net, which is essential before you begin aggressively saving for a house or kids.