Inheritance

[garth428]

Edit: thanks for all the advice! I’ve got a pretty good sense of direction now.

Not sure if this is the best sub for this, but I’m not too familiar with any other finance subs.

I recently received 10k and am not sure how to invest it or what to do with it. I’m hoping those who are more settled can give me advice on what to do here. I don’t want to look back in 10 years and realize I’ve mismanaged this money. Embarrassingly, I’ve done this before so really wanting to do better.

401k: $35k
Savings: $500
Credit cards: $3,000
Student load debit: 150k

I graduate in a 9 months and my loans will be deferred for 6 months. I currently rent and own one car. Would love to be able to eventually put this money towards buying a home.

Thanks for any advice!

 

[eu1er]

@garth428 Pay off your damn credit cards and never hold a balance again.

Hold the rest in easy to access liquid savings for emergencies. With 150k in student loans you are not going to be getting a house anytime soon. Buckle down and get a budget put together and don’t let yourself start spending money just because you are out of school and your student loans are deferred.

 

[garth428]

@eu1er I appreciate the advice, thank you!

 

[fullofspirit]

@garth428 It’s a lot of debt to be carrying, but typically they’ll be looking at the minimum payments due when considering what you can afford monthly. If you’re paying, say, $800/mo on student loans. and your total monthly income is $5000 (Gross). you’re already at 16% DTI. Lenders usually peak at 36%, so that means in this scenario of $60k income, you only have $1000/mo available to you for mortgage payments.

 

[garth428]

@fullofspirit That’s very insightful, thank you!

 

[eu1er]

@garth428 It’s not that you won’t be able to, (though debt payments will eat into your DTI) but it’s that your ability to save for a down payment and then pay for a mortgage, insurance etc is going to be very hard with that debt load.

 

[chunhe889]

@garth428 10k? Thats not a ton but if you want to use it to buy a home you can put it in a roth ira and invest it in and index fund until you are ready to buy a home (typically this is good if youre waiting at least 5 years to touch the money as it can go down). you can use up to 10k of your roth ira towards a house.

you can also use the 10k to pay off high interest debt, so pick and choose what you want.

 

[garth428]

@chunhe889 I’ve been considering a Roth IRA but from what I’ve researched, I can only put 7k or so in it per year. Is that right? I’ll be a 1099 contractor after I graduate, would a Roth IRA be the best place to put my retirement money at that point or would I still want to add to my 401k once it’s rolled to a new company?

I’m a first generation graduate and the first person in my family to have a retirement fund. All of this is very new to me. I appreciate the advice!

 

[chunhe889]

@garth428 You can "make 2023 contributions" up until april of this year so you could technically deposit all of this into a roth account. Honestly I would not recommend a house anytime soon, you got a lot of debt, just pay off the CC and save a few grand for emergency fund for now then the rest towards debt is my suggestion. Whats the interest rate on the student loans?

Also a 1099 after graduating? Whats your field? That sounds strange and almost predatory I wont lie, unless its a temp to hire position or something. I am also a first generation, and just graduated a few years ago so I know what its like to be confused as a young professional.

 

[garth428]

@chunhe889 The student loans aren’t out of deferment yet since I’m still in school, but I believe they range from 7% to 9%.

I’m going to be an associate licensed marriage and family therapist and from my understanding self employed under a 1099 is common in the field. One option I’m exploring is going to pay $70 per client with me seeing 25-30 clients a week. I have a salaried option to consider as well that’s 50k a year. I haven’t graduated so these are just soft offers I’m considering. Definitely not counting my eggs here, but using them as base lines for future based thinking.

It’s definitely stressful not having professional level family who has insight to give. Thank goodness for Reddit communities!

 

[chunhe889]

@garth428 Wow those interest rates are brutal. So your expected pay would be either 50k or 70 per client at 25-30 clients a week or like $91k a year if you do 25 clients for 52 weeks? Think a 1099 means you need your own health insurance but I dont know enough about your field to weigh in.

91k starting would be nice, 50k starting would be awful i wont lie. your 150k loans at 7-9% are going to basically be like another rent to pay, its going to be expensive if youre paying back the principal in a meaninful way, I hope your field progresses in terms of salary very quickly.

Here are the steps I would take:

• start trying to maximize your salary if possible (apply for other higher paying jobs, negotiate if you have multiple offers although you wont have a ton of leverage due to lack of experience)
• once you receive and accept an offer look to minimize expenses. Live with a rommate, friends or girlfriend. May have to be a stranger which could suck but might be necessary
• contribute up to any employer related matching like a 401k or whatever you have but not more than that. its free money so take it but you have other priorities (your debt)
• save up emergency fund enough to cover 6 months so you dont have to get into more credit card debt
• stop saving for the emergency fund and tackle your debts. This step may take a decade I wont lie. While completing this look at possibilities of refinancing or anything that would help pay this debt down really. ubering on weekends or any side gigs you come up with

As for the 10k, pay off your highest interest rate loans first, start with CC probably. If you have anything over 10% use this money towards that, and maybe save 3k for emergency fund.

There are also other options to pay back loans, if you work with the government they may forgive the loans after 10 years of service. You may qualify for other loan forgiveness as well. Honestly I have no clue how you racked up so much debt, since i was first gen i was able to get a full-ride, no masters though so thats probably part of it. Anyhow, good luck. Its a deep hole youre in but there does seem to be an end to it

 

[garth428]

@chunhe889 I really appreciate the advice and information. I know things are going to be tough but feel sure that I’ll be ok as long as I get into a good paying position. I joined the personal finance sub as well so now just have to put all the advice to use!

 

[resjudicata]

@garth428 If you’re going to be 1099, you definitely want to look into a SEP-IRA. You can put away 25% of your NET earnings (up to $69k for 2024) and this will save you massive amounts in tax payments every year. It’s not a big deal to open one, just find a brokerage that offers it.

You will also want to keep meticulous records of your business expenses since you can write off a ton of them.

As far as the $10k, I think you should pay off the credit card debt and keep the rest in a high-yield savings account (Capital One, Ally, SoFi). Worry about the student loans once they come due (June 2025?). A million things could change between now and then, better to have some money available for contingencies.

I’m sorry for your loss and congratulations on your upcoming graduation.

 

[gowdy]

@garth428 Inheritance aside, can you do PSLF and get that 150k of loans forgiven? Or will you have a very highly paid job going forward?

 

[garth428]

@gowdy I will be working in a field where PSLF is an option, though many therapists I know have stopped midway through their 10 years due to burn out. 20k of my loans can be forgiven in private practice so I take comfort in that.

 

[gowdy]

@garth428 Hopefully the PSLF path will work for you. Financial stress and burnout are a thing too.

 

[metanoiabum]

@garth428 10k should be in a HYSA since you don’t have much of a savings account and pay off your cc with this.

 

[torch621]

@garth428 Pay off your credit card first. Then put $2,000 in savings and the rest towards your student loans.

 

[emmierose80]

@garth428 Um yeah , should be credit cards first, unless the CC debt is part of some 0APR promotional deal.
Also 150k is massive student debt, I’m hoping that this is for med school/some similar career where you’re making a buttload of money right outta the gate.

 

[jhofste]

@garth428 Pay off your credit cards. Put $5k in savings and keep the rest to make your first several student loan payments.