Hi everyone! Throwaway account because of internet safety or something. My (27 M) parents just gave my wife (28 F) and I a $10,000 check as some of their financial accounts have been doing fairly well and they thought we would be able to use it to do something fun or ease our debt burden a bit. Obviously this is a massive help as we are both Nurses in the first decade of our careers and we have a moderate amount of debt and payments and are trying to recuperate our savings after round 2 or 3 of house projects.
For context we currently have two car payments, my wife’s car is about $400 a month and she has about $8000 left to pay on it, mine has about $4000 left and I’ve been paying $400 a month, but mine is an informal loan and doesn’t have interest. We also have a $165,000 mortgage we pay about $1,400 a month on plus utilities and the rest of the slew of other payments like vehicle insurance and all of that. Most notably right now we owe a bit over $10,000 as our boiler broke this winter and we had to replace it, the loan is interest free for the first year then gets a super high interest if we don’t pay it off before then, but if it comes to that I plan to just take out a lower interest personal loan to pay off whatever small remainder is still there. We pay off our credit card monthly and both of our student loans are taken care of.
We’re just really not sure how we should utilize this amount of money to best benefit our situation. It’s obviously not enough to clear our debt entirely but it definitely is enough to clear one thing or put a dent in several things, but we also could put it in savings and try to not use it or maybe something else we haven’t thought of. Please go easy on me if any of this sounds stupid as I’m an absolute beginner to personal finance and usually leave these things to my much smarter wife while I take care of house chores, but she doesn’t use Reddit. Any advice on how to best use this to improve our financial situation and payments would be appreciated, thank you so much!
$10,000 gift from parents, any advice on how to best use it?
byu/Budget-Quantity-8440 inpersonalfinance
Posted by Budget-Quantity-8440
10 Comments
Your car loan has no interest, what is her interest rate?
That is very kind of your parents.
Advice from my financial advisor is to get rid of any debts that have interest rates higher than 10%.
Ideally pay off debt that has an interest rate over 6%. Pay off the thing that has the highest interest.
Pay off the boiler loan in full before the promo expires. Most of these 0% financing deals are deferred interest, meaning if you miss the deadline by even one day, they charge you interest from day one of the loan. That can be hundreds or thousands of extra dollars. Read the contract and check for the words “deferred interest” to confirm.
Skip the savings option. No savings account beats the return of killing a debt that could spike to high interest overnight.
After the boiler is gone, throw your normal monthly payments at your wife’s car next, since that is the only debt left charging you interest. Rebuild your emergency fund once both are handled.
Also, take your wife out for a nice dinner with $100 of it. Your parents wanted you to have some fun too.
Oh man, pay off her car. You can use the leftover for your emergency fund or whatever. Get that car paid off though and you can use that 400$ a month to pay extra on your mortgage for a while. That’s really generous of your folks.
That boiler loan is like a sleeping bear that is going to wake up and eat you 🙂 Get rid of that ASAP.
I advise my clients to invest the money into managed or index mutual funds if they have debt that’s costing less than 10%. You’re at an age you need to become acquainted with an investment advisor. I recommend an Edward Jones advisor.
I would pay off the boiler loan. You absolutely cannot let that 0% promo expire. And you aren’t in a position to take out another loan to deal with it.
Kill that debt. If you have any left over after that, drop it on any remaining high interest debt. If you don’t have any, build that emergency fund.
If her car loan interest is lower than the “super high interest” on the boiler, pay off the boiler.
Unless you’re confident you can pay off her car now with the $10k and the boiler before the super high interest kicks in.
Put it away and don’t do anything with it for awhile . You’ll better use it later