Comments on: A Question About Windfalls Leads to a Revelation About Debt

By: Johanna

Johanna — Thu, 19 Feb 2009 19:37:18 +0000

@SteveJ: I’m not sure anyone actually said that mortgages are not debt. What they *have* said is that someone who would use a windfall to pay down a mortgage is not necessarily “struggling with debt,” as Trent suggested they were.

By: SteveJ

SteveJ — Tue, 17 Feb 2009 23:18:08 +0000

I don’t get the quibbling over mortgages not being debt either. I just ran the numbers…if I threw 10K at my mortgage I’d save myself 37K in interest over the remainder of the term. *Drooooolll* That beats the snot out of saving $800 in interest by paying off my wife’s student loan, or the $500 in interest by paying off the car and credit card.

Of course the main problem with throwing windfalls at debt is that you can’t get it back later if you need it. Diversification sounds like a plan. I also like the idea of maybe putting it in a CD and having a little passive income coming in. It’s free money after all, not like it throws off the debt repayment plan. But…I’m too competitive to talk myself into giving banks that free interest money by not paying down.

By: Instant debt consolidation loan

Instant debt consolidation loan — Tue, 17 Feb 2009 10:20:39 +0000

I would like to give my views. Firstly i will investigate the money. How can one take money directly from a stranger and use it for any purpose. Once it is confirmed that there is no harm in using that money. Depends upon the circumstances i will give it to charity, and rest if i have any debt i will clear that completely.if not i will invest it for my future use.

Check out this blog for more info on various loans
http://guaranteedinstantloans.wordpress.com/

By: Becky Joy

Becky Joy — Tue, 17 Feb 2009 03:04:15 +0000

Just like the others pointing out that mortgage debt is different than credit card debt, I hope you will agree that using $10K to pay down student loan debt is reasonable and not a sign of “struggling” with debt.

Good post, by the way. And we’d certainly tithe on the gift (10% off the top) before paying down loans.

By: sharon

sharon — Mon, 16 Feb 2009 14:20:09 +0000

I actually received such a windfall recently by unhappy circumstances (death of a family member). I put everything in a CD except 5% which went to my church which does charitable work. I’m planning on using @$2-3000 as part of a planned European vacation next year. We have no consumer debt and I’ve already refinanced our mortgage and have 6 months e-fund.

I’m not buying any ’stuff’ even though I’d love a new car – current one is 11 yrs old- it just doesn’t juice me any more. My goal is no mortgage and retire early as possible and you Trent and your readers have helped me stay focused on this goal. Please keep blogging, you make a difference.

By: Jen

Jen — Mon, 16 Feb 2009 08:51:09 +0000

I wish all of the overly critical readers of TSD would actually quit reading and commenting, like they always threaten. It’s such a bore to labor through their comments.

If we received a 10K windfall, it would be used to rid ourselves of debt. That would be non-mortgage debt for those of you who like to quibble over “generalizations”.

By: WhirlMind

WhirlMind — Mon, 16 Feb 2009 07:41:25 +0000

Good Post.

By: Tim

Tim — Mon, 16 Feb 2009 02:19:29 +0000

College fund comes to mind. As does establishing a ‘parent fund’ to help my folks. All looking to the future. My take is that we’re nowhere near the bottom in this financial mess, so anything which insulates from the anticipated bumps.

That being said, I could really use with an escape from this winter, so maybe a few days in Aruba. Lewis Black has gotten me thinking ….

By: Daria

Daria — Sat, 14 Feb 2009 22:26:17 +0000

In the 1990’s my husband worked at a job that paid a once a year bonus. We either used it towards our childrens’private school tuition or we bought him a new car because he usually worked 70-80 hrs a week and it was like reward for him. The last year he worked that job, we had no short term or long term debt and knowing he would not get a bonus in the new job he was leaving for, we used his 15K to buy a single family property for investment. We held the property for 7 years and sold it 3 years ago to help pay for college costs. We have four children and with academic scholarships and that rental property, all four are graduating debt free. If we could do it all over again, I would have invested every single bonus. We could have driven cars longer and not all of our children appreciated the private school education. Two would have been just as happy staying in public school

By: Jen

Jen — Sat, 14 Feb 2009 21:43:46 +0000

$5K straight into the IRA, $1K to charity, and the rest kept in cash until I find a job.

By: Mule Skinner

Mule Skinner — Sat, 14 Feb 2009 21:11:44 +0000

I think that spending it is sorta charitable since it would support someones occupation: auto workers if I bought a car, cooks and waiters if I ate out, etc.

Unemployment is a problem currently.

By: Ilah

Ilah — Sat, 14 Feb 2009 17:32:18 +0000

I would give zero dollars to a charity! Except for a charity of my own making, helping one of my kids or even a local family who is struggling. Sometimes the best charity you can contribute to is yourself, i.e. if you have debt or no emergency fund. There are too many charities who use 80-90% of their donations to cover administration costs. IMHO, no one working for a charity needs to be making over $100,000 a year. (By the way, I work for a non-profit)
There, that’s my rant for the day-
I would use an extra $10,000 to pay down my mortgage, plus I’d keep out $2,000 so I could go visit my son & family in Brooklyn this May (after my newest granddaughter is born).

By: Dan

Dan — Sat, 14 Feb 2009 16:20:44 +0000

No Credit card debt, no car loans (there all old clunkers that still run well.) Mortgage paid off. Fairly substantial emerg fund.
Sounds like I’m bragging…. Maybe. But this financial armageddon has been a decade in the making, I read and adopted the
principles in”Your Money or your Life” a long time ago. They are tough but they work. So 10k… I would stimulate the economy.

By: Linda

Linda — Sat, 14 Feb 2009 15:55:14 +0000

This happened to us when Veteran’s Affairs paid us back some long overdue pension. First portion went to charity, then credit card debt, then savings. We want to make some home improvements. Without credit card debt, we can actually add to the savings account each month now!
Thanks for all the great guidance you give on your blog! Very, very helpful!!!

By: Carrie

Carrie — Sat, 14 Feb 2009 15:42:44 +0000

I get a windfall once a year when my bonus check arrives. 25% goes into long term investments, 25% goes to extra mortgage paydown, 25% goes to longer-term savings (like for a car, home improvements, etc.) and 25% is discretionary. I usually end up spending some of the discretionary funds and saving the rest. Since I plan budget, including retirement funds/IRAs/emergency fund assuming that the windfall isn’t there, the windfall gives a huge boost toward my goals.

By: Peggy

Peggy — Sat, 14 Feb 2009 15:41:22 +0000

100% to debt reduction here. As long as we are so hand-to-mouth we don’t have even enough to set aside in an emergency fund. We are less than 15 years from “retirement” (ha! ) and have nothing saved for that, either. Buying a house was the worst decision we ever made and I will regret it forever.

By: Bekki

Bekki — Sat, 14 Feb 2009 15:21:53 +0000

Ugh… my husband and I were in just this situation a couple years ago, and we went about it all wrong.

My husband and his father own a plumbing and HVAC business together. This was their first year and things were going so well that we really had to get rid of some money (wish I had that problem all the time).

We decided that each of the 2 families would get $10,000 to spend on whatever we want.

My in-laws used it as a downpayment on a new GMC Yukon – my mother-in-law has a thing for having a nicer car than everyone else.

As for us, we blew it mostly on stuff we didn’t need. At that time in our marriage, we were about $40,000 in debt – but instead of knocking 25% of that away, we spent only $2000 on paying off debt, $1000 on helping my parents with car trouble, and the rest was spent on new bedroom and living room furniture, decor for said rooms, video game stuff for my husband, and a week-long vacation to Niagara Falls, ON for our anniversary.

Looking back, it was such a waste. The furniture we had was certainly not beautiful, but it was functional. And we really didn’t need a week-long vacation – perhaps a weekend away in the Berkshires (only a 2 hour drive away) would have been just as nice.

Every time I remember that summer, I shudder when I think of how that money was wasted.

If we ever, ever find ourselves in a position like that again, a huge portion of it will go towards paying off our debt (which is now down to about $20k) and the rest will go into savings for our daughter’s future.

By: marc

marc — Sat, 14 Feb 2009 14:54:27 +0000

I would give some of it to charity. (10%-20%) and invest the rest in our children’s 529s. If it is an unexpected windfall, give some of it away. It creates good karma. I believe that what you give away comes back tenfold.
Just my two cents.

By: CPA Kevin

CPA Kevin — Sat, 14 Feb 2009 14:24:24 +0000

Did anyone mention giving some away? I think I would give at least $1,000 to charity.

I would probably buy something that I would never otherwise buy – like an Ipod Touch or something and get a laptop for my wife to use at home.

After that I would probably invest it – I have some ideas on where but just don’t have the funds right now.

By: Dave

Dave — Sat, 14 Feb 2009 14:08:03 +0000

Like another here, I’ve actually had this in the last year. My Mother-in-law gave us $10k of an inheritance she recieved. This was in Aug, our only debt is $30k in Student Loans (renting, 1 new/paid/car, 1 old/reliable truck). But we were in the unique situation that my wife was diagnosed with Leukemia that May when our daughter was only 9months old. We immediately banked that $ somewhere safe, and have been keeping it as a Fully Funded Emerg Account. If my wife hadn’t gotten sick, we would have held it for a down payment on a house. Despite having $30k in student loans, we were easily making double payments. We wanted this money to be available if we happened upon a deal of a house. We wanted to be prepared if the occasion arose.
And for those wondering my wife is now doing well, just under a year from initial diagnosis.