Inheritance help

**bjl584** · 08-09-2012, 09:29 AM

The first thing that I would do is ask yourself why and how you have $30,000 in credit card debt.

Simply using an inheritence to pay it off is a temporary fix at best if you don't change your lifestyle and your attitude toward money. Because, before long you will run the credit cards right back up again.

Sorry for preaching to you, but most folks on here are fairly frugal and against debt.

Can you post up a detailed budget listing all monthly income and expenses? It will be easier for us to help you.

**soccer_mom** · 08-09-2012, 10:02 AM

I agree, we need to change the cc problem. I intend on cutting them this time for sure.
I will get to work on some figures. I just thought there was a general rule of thumb as far as paying down the high interest items but didn't know where the mortgages figured in.

Love the fact that there are generally frugal ppl here. I need all your pointers

**BMEPhDinCO** · 08-09-2012, 10:15 AM

How far underwater are you? If that $60k is enough to let you refinance, that might be the better option.

Otherwise, pay off the credit cards (and only use them WHEN YOU ALREADY HAVE THE MONEY), then put $10k into an emergency fund, then put the other $30k on the second mortgage.

And, as said, if you post your income and expenses, we can help you pay off the mortgages faster.

**bjl584** · 08-09-2012, 10:22 AM

Originally posted by soccer_mom View Post

I agree, we need to change the cc problem. I intend on cutting them this time for sure.
I will get to work on some figures. I just thought there was a general rule of thumb as far as paying down the high interest items but didn't know where the mortgages figured in.

Love the fact that there are generally frugal ppl here. I need all your pointers

The general rule is to pay of the highest interest rate loans first, then work your way down.

**soccer_mom** · 08-09-2012, 11:34 AM

Originally posted by BMEPhDinCO View Post

How far underwater are you? If that $60k is enough to let you refinance, that might be the better option.

Otherwise, pay off the credit cards (and only use them WHEN YOU ALREADY HAVE THE MONEY), then put $10k into an emergency fund, then put the other $30k on the second mortgage.

And, as said, if you post your income and expenses, we can help you pay off the mortgages faster.

That is what I was thinking. Paying off the cc's, saving a little something and putting the rest towards that 9% mortgage so I can refinance. Going from a 9% to a 3% has got to help.
Thank you

**bjl584** · 08-09-2012, 11:50 AM

Originally posted by soccer_mom View Post

That is what I was thinking. Paying off the cc's, saving a little something and putting the rest towards that 9% mortgage so I can refinance. Going from a 9% to a 3% has got to help.
Thank you

What is your house worth? Make sure that you qualify for a refi.

**soccer_mom** · 08-09-2012, 02:43 PM

Originally posted by bjl584 View Post

What is your house worth? Make sure that you qualify for a refi.

Good point. We are losing value every time we check

**jpg7n16** · 08-09-2012, 05:41 PM

Originally posted by soccer_mom View Post

Just like so many, we are overloaded in credit card debit ($30,000 @ 10-15%) and have 2 mortgages with high interest ($84,000 @ 5% and $78,000 @ 9%) I should be getting around $60,000 soon. What should be paid off? We can't get refinancing because we owe more than our house is worth now. Would it be best to pay off the credit cards and pay down some of the mortgage loans or pay most of one of the mortgages and refinance?

I would likely use $30k to pay off the CC debt, use $10k to fully fund you and your husband's Roth IRAs for the year, use $50 to buy budget software, use whatever it takes to refi your homes down to lower rates, and the rest to fully fund a proper emergency fund of 5-6 months expenses.

As Brian pointed out, if you do not fix the problem that created the debt in the 1st place, you will find yourself back in debt and have wasted all your parent's did to give you that inheritance. Going back into CC debt would be a very poor way to honor them for leaving it to you.

Also, what are the tax consequences if any, when you get an inheritance?

Thanks for any advice.

That depends on what sort of inheritance you received. If it's in a retirement account or annuity you will likely owe tax on some/all of the balance.

If it's inherited stock or mutual funds, in most cases you won't owe anything, but may owe a small amount if they increased in value past the date or death or alternate valuation date.

If it's cash from the estate, cash from the sale of estate assets, or cash from life insurance proceeds, you owe nothing.

**JoeP** · 08-10-2012, 05:29 AM

Originally posted by soccer_mom View Post

I agree, we need to change the cc problem. I intend on cutting them this time for sure.

You say "I intend" ...if you have a spouse, it is important for you both come to the conclusion that the cards need to be cut up, otherwise your chances of success are slim.

If you currently lean on the cards often, quitting cold turkey like you propose will work better if you have a plan on how you're going to make ends meet. For example, budget out all your expenses, and earmark every dollar so that it is clear where your income goes.

I'd pay off the credit cards and set up a generous emergency fund. If you're like most people, when emergencies come up (like needing a dishwasher or car repair) they hit the credit card. Don't do that. Use the emergency fund to pay for it, and then temporarily re-budget to build it back up.

You have a blessing, don't let it go to waste!

**dontgopoor** · 08-12-2012, 08:59 AM

The advice posted so far seems very good - eliminate CC and highest cost debt first. The key for you is to understand why you have historically leaned on credit. Look at the types of purchases have you historically made with with credit - that should give you a clue as to why you use credit. Then you can begin to address that root cause. Feel free to post a breakdown of general categories such as:

- clothing - 20%
- eating out - 20%
- vacations - 50%
- medical emergencies - 10%
etc.

Inheritance help