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An inheritance and plenty of uncertainty
Chris Farrell Feb 27, 2012
I will receive $25,000 in the next couple weeks from the sale of my mom's house. She died suddenly of a brain aneurysm last spring, at age 58. I am asking for advice on how to invest this small windfall. (I also received another $10,000 from her life insurance last year and used that to pay down a personal bank loan of $6k and credit card debt.)
Here are my stats: I'm 36 and went back to college in 2010 to finish my first degree (I had worked in insurance and kept hitting income/advancement ceilings due to not having a degree.) As of May, I will graduate with $45,000 of loans. I have $7,000 in credit card debt and own a house with a $130,000 left on the mortgage. I do have $10,000 in a 401k at a previous employer and I also inherited her 2009 car, so I have no car payment.
I realize paying down debt is the fastest return on the money, but I feel like I don't want to just sink this money entirely into student loans, which have a low interest rate. My plan is to pay off the credit card debt and create a small emergency fund. This will leave around $15,000. Would it work to place some of it in longer term investments or just completely add the money to my debt?
To add complication to the situation. I am studying graphic design and the firms I am in touch with all say they have increased hiring and the future looks good for this career. However, there is the option that I may want to free-lance or split off on my own in two to four years and could use a cushion to help as a startup. Thank you for any advice or information. Jamie, Eden Prairie, MN
A career poised for take-off
Chris Farrell Feb 24, 2012
I have been out of college for just over a year now and am waiting to be hired by the Federal Aviation Administration (FAA) as an air traffic controller (a 2 to 3 year process, on average). I was lucky with scholarships and waivers and have about $20,000 in student loans (all federally subsidized) and am currently on a standard payment plan for a 10-year repayment period. I have enough saved up in CDs, money market accounts, savings and mutual funds that could pay off all of the loans but only leave me with about $5,000 left over to deal with any "unplanned" expenses (I have no credit card debt and a full-time job with a major airline). Is it smart to get rid of all of my debt immediately but be left with little to fall back on? Should I pay off half of the loan and repay the rest over time? Michael, Minneapolis, MN
A sweep account and an IRA
Chris Farrell Feb 22, 2012
I am 24 years old and starting to get a handle on my financial situation. I have started an emergency savings account and am ready to open a Roth IRA with $2,500. I started an application for an account, but it asked for my choice of a sweep fund. Nothing I've read has mentioned this and my Internet research has come up with limited and confusing information. What is a sweep fund and how do I choose one? Julia, Boise, ID
For five years of love and fiscal responsibility
Tess Vigeland Feb 17, 2012
A marine declares his love for his wife of five years, who along with love diligently sent him burned copies of Marketplace Money every week through two tours of duty.
Thoughts for a really good saver
Chris Farrell Feb 16, 2012
I'm in my early 30s and work in the government sector. I contribute to a 401(a) and a 457 through my employer, and after discussing things with my wife, I have begun to think I may actually contribute TOO MUCH on a monthly basis. I contribute about 31 percent of my pre-tax income, including those two plus another ~5 percent after taxes to the 401(a). We have a mutual fund that had an acceptable return in 2011. Would I be better off lowering what I contribute to my 457 and 401(a) and increasing deposits into the mutual fund instead? I recently got a promotion with a substantial raise, so I thought now would be the time to reconsider where I am parking my money. Dan, Bloomfield Hills, MI
New baby, college savings and student loans
Chris Farrell Feb 15, 2012
My husband and I recently had our first child. We are considering opening a 529 plan for him, but between the two of us, we still have about $15,000 in college loan debt. Our student loans are locked in at a low interest rate (around 3 percent). On the one hand, we know that money invested in a 529 plan now will earn more over time than money invested later. On the other hand, it seems kind of odd to start saving for his college when we haven't finished paying for our own. Does it make more sense financially to open a 529 plan for him now, or to put the money we would have put into it toward paying off our own student loans first? Carol, Athens, GA
Got a raise. Now what?
Chris Farrell Feb 14, 2012
I'm thirty-seven. My home is paid off but needs repairs. My cars are old but paid for. I recently changed jobs and will be making about $25,000 a year (nearly $8,000 more a year than my old job). My sons (single parent) are sixteen and seventeen. Making more money, should I focus on saving or fixing my house and a new car in preparation for a time when health and limited income will make it hard to do? Paying for college is off the table; they know that. I have about a thousand dollars in credit card debt that I plan to pay off. I plan to have nearly eighty dollars a week or three hundred dollars a month toward these goals. I live off so little, I want this extra to really count. First Name: Charlie, Columbus, GA
The allure of homeownership
Chris Farrell Feb 13, 2012
My husband and I are both church pastors. We have been married for a year and half and we both work full time. Our gross income is about $84,000 and we tithe 10 percent to our churches and charities, which we will continue to do. We are trying to decide whether or not to purchase a home, and whether we are saving money in the proper places.... Is this a good time to buy a home? What if we needed to sell it in four years? Should we be putting less money into savings and more into the Roth IRA's? Thank you for your help! Emma, Beverly Hills, MI
The skinny on secondary market annuities
Chris Farrell Feb 10, 2012
I am retired and would like to safely increase income. What is a secondary market annuity? Is it a suitable vehicle for putting a portion of retirement funds to safely increase guaranteed retirement income? Are there issues to be aware of with the secondary market annuities? How should this product be purchased? Thanking you in advance for any light you can shine on this topic. Ronald, Rhinebeck, NY
Figuring out student loans and a home
Chris Farrell Feb 9, 2012
I have a dilemma that I hope you can offer some advice on: I am currently in the process of paying off some hefty student loans I accumulated while earning my bachelor's and master's degrees. I pay almost twice the required payment. (Please let me know if you need specific figures.) My husband and I would like to save for the down payment on a home to be purchased within 5 years. Would it be more advantageous for me to continue aggressively paying down the loans (fixed interest rate of 4.25 percent) or save as much as possible to apply to a home to be purchased in the near future? Michelle, Indianapolis, IN
