Asked & Answered

Blowing My Inheritance

Q - I just inherited $50,000 and I owe $400,000 on my house, $20,000 on the car, and $10,000 in credit cards. Any advice?

A - Stop spending so much. Also, pay off your car. If you are done spending more than you make, then pay off your credit cards as well. Otherwise, you will just charge your cards back up again and essentially wasted a chunk of the inheritance.

Put $10,000 in the bank (a money market account at 5% would be best) for emergencies (then you won’t need the credit cards), use $5,000 for something nice for your family since it was an inheritance (perhaps children’s college fund) and use the other $5,000 for something fun for yourself.

While you are at it, try paying half your mortgage payment every two weeks, and round your payment up (if it is $2,125 per month, pay $2,200). You’ll knock about nine years off your mortgage and save about $100,000 in interest.

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Bill Pratt is a former credit card executive turned student-advocate. He is the author of Extra Credit: The 7 Things Every College Student Needs to Know About Credit Debt & Ca$h and a contributor to YoungMoney.com. Bill speaks at colleges to educate and entertain students about real-life issues in money, leadership and success. His goal is to help students succeed personally and financially so they can improve the lives of those around them.You can learn more about money at www.ExtraCreditBook.com