Quote:
Originally Posted by alliswill
My parents, mid 50's, will soon be receiving $20,000 from an inheritance check. and they are needing advice on how best to use it. here are some facts:
- joint annual income $23,000 (my dad's job includes housing)
- NO HOUSE (no house payments)
- no savings
- about 20,000 in debt, primarily credit cards
- about $800 per month currently goes toward debt.
One goal they have is to purchase a house so they can build equity and also have a place to live if they ever lose their job or retire. They also would like to get out of debt but have not be overly diligent in doing so. which option to you think best?
1. use the 20k to put down on a house and starting building equity immediatly and continue to pay off debt.
2. put the 20k into an IRA and invest it since they don't have any savings yet.
3. use the 20k to pay off their current debts. Then use the money they would have been paying on debt to save for a downpayment on a house. then sink money into an IRA.
I am leaning toward option #3. what do you think? Option 1 simply increases their debt ratio and adds to their monthly payments. Option 2 would not probably not earn as much as they are currently spending on debt. I'm thinking it would be best to get rid of their debt, save for a house, then invest into an IRA. i think that what they decide to do with this 20k could greatly impact their financial future. what would you do in their situation?
thanks,
Craig
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Okay, I just cannot imagine this situation. How in the world do two adults in their mid-50's have a yearly income of 23k (including housing) and have "no savings"? They are essentially spending 2k a month on what ?
Is this military -- is there any kind of pension here? Something has to be missing. I just don't see how they can "retire" given that the above is the whole picture of the situation here.
If they pay off 20k of the debt, it would be a good chunk of what is owed, but without knowing the history of that debt, how can you control what they will use that 800 per month for in the future? How much house will 800/month buy in today's terms?
If they save 800/month for a year they will have 9600. I don't know which state this is, but ultimately I don't see your folks could get any kind of a loan for any house based on their income. If they continue to save that amount for 10 years they will have 96k; but is that realistic? Will it buy a house for them in that area.... and they will be in their mid-60's at that point.
If the above picture is all there is, then these folks will need more money for a house. How will they live once they have that house and could they ever realistically "retire"? They will still continue to need an income if only to pay their "needs" -- roof, food, etc.
Nothing personal here, just trying to understand this...