A 10k inheritance

[MattymcMattMatt]

Hi there, so my grandfather passed away not too long ago, bless his soul he needed to die he was in a lot of pain and wasn't there mentally.  Any ways my grandpa was extremely frugal.  For not being in the upper class and never going to college he died with a significant amount of money to which I am receiving a small portion.  $10,000 to be exact.  Now I am trying to think of what I should do with this money. So here is my situation, I am a 1st year dental student, with currently 40k in debt from my first semester.  I am married with no children.  My wife is working a full time job but it just barely gets us by.  We have to budget so tight but we make it work.

She has some student debts from undergrad roughly $3,000 I have no loans from my undergrad.  I have been thinking just paying off her student loans and hold the 7k as an emergency fund. Or should I place the rest of the money into my Roth IRA?  Or is there another option that I am not even thinking about?

Basically I have never had a situation like this and I am uncertain what to do with this money that I am receiving.  I want to make the smart choice and the one that will be delayed gratification.  Any insight and ideas would be greatly appreciated.

I have thought about buying a motorcycle..... just kidding.... but seriously.

[HandFellow]

is your debt situation going to be 40k every semester?  As in, 80k per year?  Seems criminal.  I would hold onto the money as an emergency fund.  If the 3k debt is higher interest, I would consider just getting rid of it and doing as you said.

[MattymcMattMatt]

Yes Sir I am looking at 80k a year.  I do feel like I am being robbed. The interest rate on the loans is an uncomfortable 6.4%, I would consider it to be on the higher end or maybe it's not i'm not too sure never had loans or debt of any kind before.

 

[jhwkr542]

If money is as tight as you make it out to be, I'd just keep it liquid in savings. It depends on how much you have as an ef but a relatively small amount like this won't make a dent on your upcoming debt mountain.

[HandFellow]

6.4 is pretty much the standard these days and has been since 2006, i think.  The sheer amount of loans is the crazy part.  Do your best to minimize your loans, especially with a working spouse.  It will pay off in the long run to not borrow for living expenses.

[Peds]

yup. just hold onto it. are the 3k in forbearance? if not then sure pay them off.

[Faithful Steward]

First off, my condolences for the loss of your grandfather.

In regard to the money, I think your instincts are right on. Pay off your wife's $3,000 of student loans and place the balance in your emergency fund.

[Dreamgiver]

80k/yr for dental school? Wow, that is insane. Is that just tuition or also living expenses? Try to get a scholarship or such if possible. 10k is a drop in the bucket, just keep it as an emergency fund.

[Dr. Mom]

I'm sorry for your loss.  When my grandmother died I received a similar amount.  I spent a few months deciding what to do with it that would be in line with what she and my grandfather would have wanted me to do.  They were similarly frugal like your grandfather.  They both immigrated here and never had any type of formal education.  The fact that they left an inheritance to as many of us as they did is astounding to me.  My grandfather told me stories of having to search for coal in a train yard during the Great Depression just so his mother could cook for him and his brother. My grandmother came to the U.S. by boat with nothing more than a small suitcase no larger than a carry on today.  I still have that suitcase.  In the end I decided to split the money between paying down the mortgage and my retirement account.  When I think about owning our home and having the option to retire when we want, I remember their contribution and am grateful.  Good luck in deciding what your grandfather would have told you to do with the money.

[Dr. Mom]

Thought this might help you decide...

http://www.zenwealth.com/businessfinanceonline/TVM/TVMCalculator.html

It is a time value of money calculator.  Put in your grandfather's inheritance as (-10000) under PV (Present Value).  Put in (0) under PMT (Payment).  Then make some assumptions of Rate and Periods for yourself to see the FV (Future Value) of his gift.

[MattymcMattMatt]

So that is just tuition... My wife is able to cover all living expenses I am allowed to withdraw 100k a year, they give us 20k for living expenses, but that is way too much.  Even 80k is too much but I have applied for some scholarships so fingers crossed there.  I also plan on picking up a part time job after I take part 1 boards during my D2 year.

 

Thanks for all the feed back I appreciate it! Helps me feel like i'm doing the right thing with the money I am receiving.

[mobilehomegurl]

As others have suggested, you may want to add it to your emergency fund. Having extra money just in case anything happens helps since your budget seems to be tight.

[Craigy]

Deposit into your checking account.  Then see where life takes you.

[Murgency]

I would pay off her loans, for simplicity, then keep the rest as an emergency fund.

[adventure]

MattymcMattMatt wrote:

I also plan on picking up a part time job after I take part 1 boards during my D2 year.

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Invest in yourself first - Put school first. If you have extra cycles to make a few bucks, great. Otherwise, take the loans. Don't spread yourself too thin. You're job is to get through school, so you can be there in a family, and have a life after school. #4 below is meant to help deal with bumps.

 

MattymcMattMatt wrote:

Or is there another option that I am not even thinking about?

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1. Buy your wife dinner.

2. Pay off her loans. She'll feel happy. You'll feel happy. You'll both have better monthly cash flow for the rest of training.

3. Can you guys fund her Roth for $10/$50 month?

4. Keep for an emergency fund. (high interest savings, etc).