Hi everyone,

I am incredibly grateful to be receiving a $200,000 lump sum from my grandmother. I’m looking for advice on the smartest moves to make for our long-term personal finances.

Our Financial Snapshot:

1. Household Income: $130,000/year (Sole earner; my wife is a full-time mom, and we have a baby).
2. Monthly Budget: Earnings barely cover current expenses with very little room left over for routine investing, especially after recently purchasing our home.

Current Assets & Savings:

1. Emergency Fund / Joint Savings: $30k in HYSA + $20k in VTI/VXUS
2. Taxable Brokerage: $30k (Individual stocks)
3. Crypto: $40k in Bitcoin
4. Old 401(k): $30k in Target Date Fund (Current employer does not offer a 401k)
5. Roth IRA: $30k (VT)
6. Traditional IRA: $5k (VT) (Recently switched from Roth to Traditional contributions to lower AGI and reduce monthly student loan payments under IDR/IBR)
7. Wife: $50k savings and $400k worth of property in a foreign country – not planning to sell anytime soon.

Current Debts:

1. Student Loans: $340k total (Grad PLUS under IBR/IDR). ~3 years into a 20-year forgiveness timeline. Rates vary between 3% – 6%. Current payment: ~$450/month. Projected "tax bomb" at forgiveness is estimated at around $110k.
2. Mortgage: $572k balance @ 5.75% interest ($4,000/month PITI).
3. Auto Loan: $42k balance @ 0.99% interest ($610/month).

Questions & Considerations:

Since our monthly cash flow is tight, some options I have in mind:

1. Student Loans vs. Tax Bomb: Does it make sense to pay off the higher-interest student loans (5%–6%), or should I keep payments at the IBR minimum, ride out the 20-year forgiveness, and invest a chunk of this $200k specifically to cover the future tax bomb? Or half and half?
2. Mortgage Paydown / Recast: Should I put a significant portion toward the 5.75% mortgage to lower our principal/monthly payment (via a recast) and free up monthly cash flow?
3. Investing: How much of this should be added to our taxable index funds/HYSA vs. debt paydown?
4. Auto Loan: At 0.99%, my instinct is to just keep paying the $610/mo minimums and let high-yield savings/investments beat that rate. Is that the right call?

What would be the most strategic way to deploy this $200k? Appreciate any insights or perspectives!