Seeking advice about how to use windfall

[sweetness]

Hello, all! My hubby & I have been seeking some advice as how to best use a $10K windfall we will be receiving in a few weeks; so I thought I'd throw this out here.

Here's our situation:

*We just moved to a new state 3 months ago to work in a ministry. We live in a parsonage, and our utilities are covered; but the church cannot afford to put us on any other salary right now. We also have free cell phones.

*My husband took a small flexible job to cover our expenses, but he'll only be making about $20K per year.

*I bring in a little bit through my ministry website and eBooks (a few hundred dollars per month, currently going to debt); but I homeschool our six kids, and getting a job for me is out of the question. (FYI, our kids are ages 8 and under, and we're not planning to have any more. I figure that is significant info here, since we've had to budget a birth almost every year in the past!)

*We don't have a lot of monthly expenses ~ just phone/net (which is less than fifty bucks a month here), insurance, gas, & groceries plus the occasional or annual stuff like auto maintenance, homeschool curriculum, etc.

*We have our basic $1000 "Emergency Fund" (we are Dave fans), and we are working on our "Debt Snowball," which is now right under $7500.

All that said... what would y'all advise that we do with this $10,000 lump sum? We plan to tithe on it and then shuck out just over $1000 in necessities. We'd love to just wipe out the debt with the rest; but we'd also feel a lot more secure with more in savings, since we are feeding 8 on one man's small salary.

What think ye? Thanks!

[Slug]

What kind of debt is it and what's the rate?

Does living in parsonage = no rent?

[disneysteve]

If you are following Dave Ramsey's plan, your answer is clear. The money should go to your debt snowball. You can donate $1,000, use $7,500 to wipe out the remainder of your debt and have $1,500 remaining for other needs. Then you have a clean slate and can start building your fully funded EF.

[littleroc02us]

Hello, all! My hubby & I have been seeking some advice as how to best use a $10K windfall we will be receiving in a few weeks; so I thought I'd throw this out here.

Here's our situation:

*We just moved to a new state 3 months ago to work in a ministry. We live in a parsonage, and our utilities are covered; but the church cannot afford to put us on any other salary right now. We also have free cell phones.

*My husband took a small flexible job to cover our expenses, but he'll only be making about $20K per year.

*I bring in a little bit through my ministry website and eBooks (a few hundred dollars per month, currently going to debt); but I homeschool our six kids, and getting a job for me is out of the question. (FYI, our kids are ages 8 and under, and we're not planning to have any more. I figure that is significant info here, since we've had to budget a birth almost every year in the past!)

*We don't have a lot of monthly expenses ~ just phone/net (which is less than fifty bucks a month here), insurance, gas, & groceries plus the occasional or annual stuff like auto maintenance, homeschool curriculum, etc.

*We have our basic $1000 "Emergency Fund" (we are Dave fans), and we are working on our "Debt Snowball," which is now right under $7500.

All that said... what would y'all advise that we do with this $10,000 lump sum? We plan to tithe on it and then shuck out just over $1000 in necessities. We'd love to just wipe out the debt with the rest; but we'd also feel a lot more secure with more in savings, since we are feeding 8 on one man's small salary.

What think ye? Thanks!

What would Dave say?

[bjl584]

I agree with Steve. Pay off the debt and use the remainder to start building up your Emergency Fund.

[sweetness]

Thanks for the input!

I realize that according to Dave's steps, we should knock out the snowball; but I've heard him several times advise people on the radio (specifically people with low income and a lot of children) to do things a little differently.

Yes, parsonage means no rent. All of our debt is credit card ~ most of it is 0% until August, and about $2K of it is 7.99%. So of course we will completely pay off the little card. I was thinking about maybe sticking one or two thousand in the EF along with what we have and getting the rest of the debt paid off before the interest kicks in in August. We would just feel more secure with a little bit more of a cushion, since the odds of someone having an accident or need a doc visit/meds/whatever are higher in a family with so many children.

But I would also feel so great to be debt FREEEEEEEEEE!!! That would free up money to put in savings instead of credit card payments (although I think we might have more of a tendency to *spend* that money than save it when it's not tied up, because we are living on so little now and have so much more we want to spend on. For example, we have no money now for babysitters or entertainment, and I'm only spending $100/week on groceries for a family of 8. It would be nice to have a little relief every once in a while in those areas, and we would also so LOVE to take a weekend trip somewhere this spring).

Anyway, I could go on all day making it sound more complicated... but it looks like we can't go wrong just getting out from under that debt bondage!

[snshijuptr]

If you are debating using that money for things you cannot afford (dates, vacations) then you should pay off the debt. You have chosen this life so you need to live within your means. And this windfall should not be included in your means.

[jpg7n16]

I realize that according to Dave's steps, we should knock out the snowball; but I've heard him several times advise people on the radio (specifically people with low income and a lot of children) to do things a little differently.

No he doesn't Those are different situations.

The only time I've heard him deviate from pay off all the debt is if your job is in jeopardy. Then he'll say 'put the debt snowball on hold and stockpile cash'


Other than that, he's pretty adamant about sticking to $1000 EF and then pay off all debts. Then build 3-6 month EF, etc.

http://www.daveramsey.com/media/pdf/fpu_babysteps.pdf

Like Steve said above - if that's the plan you're on, it's pretty clear what to do.

Tithe, pay off CC's, then add extra to EF. Those 'necessities' should be covered as part of your normal budget.

[disneysteve]

That would free up money to put in savings instead of credit card payments (although I think we might have more of a tendency to *spend* that money than save it when it's not tied up, because we are living on so little now and have so much more we want to spend on. For example, we have no money now for babysitters or entertainment, and I'm only spending $100/week on groceries for a family of 8. It would be nice to have a little relief every once in a while in those areas, and we would also so LOVE to take a weekend trip somewhere this spring).

That concerns me a little but Dave Ramsey does tell people that after the debts are gone and the EF is funded, that is the time when it is okay to buy a new sofa or upgrade the junker car as long as those purchases are made in cash. That doesn't mean you go wild and cruise to Tahiti, but having a babysitter come in for a couple of hours so you and your spouse can have a peaceful dinner or see a movie certainly wouldn't be unreasonable. And don't forget, retirement saving starts when the debts are gone, too, under Dave's plan.

[Joan.of.the.Arch]

If you do not have any health insurance, I'd spend some of the money on insurance for the children plus at least one parent, probably both. (Your kids probably qualify for state medical aid anyway.) I would not rush to pay off the credit cards that have zero interest until summer. Just keep paying them on schedule to finish the payments before interest kicks in, of course.

[sweetness]

Don't misunderstand me ~ I don't want to use the windfall to "goof off" on all that stuff. It's either going to debt or savings *and* debt, nothing else. What I was saying is that *if* I pay off the debt with the windfall, I think it would be more tempting to spend the extra money in the budget (that's not going to debt) on all those other things instead of saving it. If we pay off $6K of the debt and stick fifteen hundred in savings, we'd still work our butts off to get rid of the debt by August, just like we are now.

[sweetness]

If you are debating using that money for things you cannot afford (dates, vacations) then you should pay off the debt. You have chosen this life so you need to live within your means. And this windfall should not be included in your means.

See my post above. I'm not talking about using the windfall money on those things.

[sweetness]

No he doesn't Those are different situations.

The only time I've heard him deviate from pay off all the debt is if your job is in jeopardy. Then he'll say 'put the debt snowball on hold and stockpile cash'


Other than that, he's pretty adamant about sticking to $1000 EF and then pay off all debts. Then build 3-6 month EF, etc.


Like Steve said above - if that's the plan you're on, it's pretty clear what to do.

Tithe, pay off CC's, then add extra to EF. Those 'necessities' should be covered as part of your normal budget.

The 'necessities' I am referring to are our annual life insurance premiums and some maintenance & repairs needed on our only working vehicle. It's not an option to pay them out of our budget because we can't afford to, and we consider this to be God's provision for that.

I think I'm giving people the impression that I'm itching to go blow a bunch of money. That's not it at all. I have indeed heard Dave advise a couple with several children and low income to have a larger-than-$1000 baby EF. That's why we do it. We did have more in savings, but as I mentioned, my husband has been unemployed; so we've been living off it. It's actually down to $750 now, but he got his first check Friday; and we are boosting it back ASAP (before the windfall gets here). I'm just nervous about having *only* $1000 in savings with having such a bare bones budget. We'd be up a creek if we needed expensive auto repairs or had a medical problem or something.

[disneysteve]

We'd be up a creek if we needed expensive auto repairs or had a medical problem or something.

Well, that's pretty much true of everyone following Dave Ramsey's plan and in the debt snowball segment of that plan. Personally, I understand the point of the $1,000 EF, but I've had plenty of instances in my life where $1,000 would not have covered what we were faced with.

[jpg7n16]

The 'necessities' I am referring to are our annual life insurance premiums and some maintenance & repairs needed on our only working vehicle. It's not an option to pay them out of our budget because we can't afford to, and we consider this to be God's provision for that.

I think I'm giving people the impression that I'm itching to go blow a bunch of money.

Sorry if it came across that way didn't mean to

My mindset was more of the 'you should account for those things in your monthly budget anyways.'

Annual premiums happen each year, so in 12 months you will have to pay them again. Are you setting aside 1/12 of the premium each month as part of your budget? Car maintenance and repairs are not emergencies - they are eventualities. All cars need repairs eventually. So are you budeting money each month for repairs? Or just hoping that you'll have the money whenever they happen?

There's a point where you need to rely on God to provide. But when God informed Pharoah that in 7 years there would be a 7 year famine - Joseph started saving up grain immediately, and the nation was saved.

We did have more in savings, but as I mentioned, my husband has been unemployed

Sorry, I don't see this in any of your posts until this one.

From reading your 1st post, I thought he was employed somewhere else until less than 3 months ago when he took the job with the new church - and at that time he also took a 2nd job to bring in some extra cash until the church can afford salary. I didn't read that to say you had a gap in employment.

That obv makes it harder to budget for planned expenses each month

We'd be up a creek if we needed expensive auto repairs or had a medical problem or something.

If the debt was on credit cards, technically you could just charge back some money onto the card.

Paying off all but $1000 of debt, and having just enough to pay the auto repairs, is virtually equivalent to paying off all the debt and having to charge $1000 to pay the auto repairs. Either way, the auto repairs are paid, and you have $1000 in debt.

But in option 2, if the auto repairs never happen you don't get charged interest or have monthly payments.