I’m receiving a small inheritance (7k) from my grandparents and a small amount of inconsistent but passive income (<100). Thing is, I don’t really know what to do with it.
I have around 4k in credit card debt (a lot of stupid and irresponsible expenses from when I turned 18), and thought about paying it off in one go, but it would leave me with ~3k afterward, and the thought of spending so much on debt makes me… anxious? I guess?
The alternative is putting it in my savings to accumulate interest, but I don’t really know a thing about them (outside of it being an account that gives me a couple cents every month in return). Any advice would be really helpful, im mostly terrified to waste it all, as it’s honestly the most amount of money I’ve ever seen in one place.
Received a small inheritance, now what?
byu/Dapper_Walrus1314 inpersonalfinance
Posted by Dapper_Walrus1314
10 Comments
Dude just pay off the credit card debt, that anxiety you’re feeling is way better than the anxiety of watching interest pile up every month. CC interest rates are usually like 20%+ so you’re basically getting a guaranteed 20% return by paying it off, which beats any savings account by miles
The 3k leftover is still a solid emergency fund to start with. Your grandparents would probably want you to get out of debt rather than let it compound while you’re earning pennies in savings
Pay off all the CC debt right this second, and avoid ever running up CC debt again.
>the thought of spending so much on debt
This is the wrong way of thinking about credit cards.
The money has already been spent.
You are not spending money now, you are paying a bill for money that was already spent.
Putting the remaining money into a savings account would be a decent thing to do.
Also check out this wiki page which has good general finance info for young adults:
https://www.reddit.com/r/personalfinance/wiki/teachme/
1. Erase the debt. You will never make more in interest than the credit card companies are charging in interest.
2. Save the remainder, use it to start your emergency savings.
3. Do not ever rack up more debt.
4. Carry on. Nothing to see here.
That’s it.
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Ok. How about you set a goal to increase that amount to 10K?
3K cc debt is not a lot, you can manage
Putting it in savings would get you 3.5% roughly per year in interest earned. Keeping the debt will lose you probably 25-30% of the debt amount per year.
Pay off the debt. You lose more money over time f you put it in savings.
3 K debt sounds like you can credit money to these cards every month and then just use then again, right?
no interest
Take this advice as you go through life. Don’t accrue any credit card debt other than the 1 month carry over until your bill is due.
The fact you feel anxious about paying off your debt is not a good sign. Most debt is bad, but some is necessary (mortgage, cheap car). The average American is fucked for retirement. Don’t be the average American no matter how you were raised.
There’s almost no better thing to do with money than pay credit card debt
Pay off debt. It would be nice to pocket your entire upcoming paychecks.