November 9, 2024
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THE MONEY MINDER

‘Rich people don’t spend their own money’: I have a $25k inheritance. Should I pay off debt or borrow against it?

‘Rich people don’t spend their own money’: I have a k inheritance. Should I pay off debt or borrow against it?

Hey Money Minder,

I thought my finances were pretty clear-cut, but now my Dad and boyfriend are throwing me for a loop. I could really use some advice:

So, here’s the deal – I’m 36, been working lousy jobs with low pay, no benefits, and a whole lot of disrespect. Both my bachelor’s and associate’s degrees haven’t done much to improve my career prospects. I’ve decided to go to grad school in the fall to shake things up. But here’s the kicker – I’ve been dealing with learning disabilities and mental health issues due to a rough childhood. This has made it tough to land a decent, well-paying job. It’s a constant struggle, and I often feel hopeless about money.

Recently, my mom passed away, and I’ll be inheriting about 25k from her insurance. My plan was to use that money to pay off my hefty credit card debt, plus get her mortgage and credit line sorted out. I’m the estate executor, and after settling the debts, I’ll pretty much break even. But here’s the twist – my boyfriend suggests taking out a loan against the 25k, consolidating all the debt, and then using the cash to pay off the loan. Family isn’t keen on helping out, and legal and financial advice hasn’t been too helpful either.

I’m worried I won’t see another lump sum like this again, and I want to make the right move. I’ve always heard that paying off debts and getting housing sorted should be top priority, but now my boyfriend’s got me second-guessing. Should I pay off my debts and sort out the estate/mortgage directly, or go the loan route? My boyfriend’s always preaching that ‘rich people don’t use their own money’, and I should think like a rich person, not a poor one.

Can you help me out here?

Sincerely, Financially Flustered

Response from THE MONEY MINDER:

Hello There,

I’m sorry to hear about the challenges you’re facing, especially during this difficult time. It’s clear that you’re juggling a lot and trying to make the best financial decisions for yourself and your mom’s estate.

In terms of whether to pay off your debts directly or borrow against the $25k, it’s essential to weigh the pros and cons of each option. Your boyfriend’s advice about not spending your own money is intriguing, but in your situation, it might be more prudent to prioritize paying off your debts and securing the estate directly.

By using the insurance money to pay off your credit card debt and getting the estate up to date, you can alleviate the financial burden and start fresh. Taking out a loan against the $25k might result in additional debt and interest payments, which could end up costing you more in the long run.

While it can be tempting to look for shortcuts, sometimes the straightforward approach is the most effective. Once you’re in a more stable financial position, you can focus on building your future wealth and making more strategic financial moves.

Remember, it’s essential to take care of your immediate financial needs first before thinking about long-term investments or wealth-building strategies. By addressing your current financial challenges head-on, you’ll set yourself up for a more secure financial future.

THE MONEY MINDER

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