Help me adult with money

[Deleted]

UPDATE:
The inheritance is on the higher end. I found a financial adviser that also has experience with taxes. He manages wealth and some other things. My friend actually recommended him and the consultation went great. I am opening a Vanguard account. I am only paying off only my consumer debt and we are going to set up an IRA as well as a 401-SEP for my 1099 job which will help with my retirement and play catch up. 

Also, WF can eat a dick. They have been terrible to work with. 

I am getting an inheritance in the form of stocks. Roughly 127-157K worth. 

20k in student loans (half at 3.75% and half at 4.75%)

8K left on my car 2.99%

11k in consumer debt 3k at 11.99% and the rest at 16%

So that's 40k in debt

I am inheriting from Wells Fargo. I do not want to keep an account with them and they insisted that open an account. I'd prefer to move it to another place because I'm not thrilled with WF. I'd like to liquidate enough to pay all consumer debt and half my student loans. I bank with USAA. 

I have one month worth of income for emergency with a super stable job and a side job that brings in a minimum of (1k a month). I am throwing money at debt and savings. 

I am about 10K behind on my retirement

The stocks are something I'd like to keep at least 2/3rds of and grow without touching for retirement. 

I am paralyzed with choices. What would you do? Paying debt to free me from minimum payments is ideal and feels freeing mentally. 

[covergirl82]

I would absolutely pay off all the debt you listed. Why would you only pay half of your student loans?

Add to your e-fund to get it to at least 3 months, although 6 months is ideal.

Would you convert the stocks you wanted to save for retirement to an IRA?

Have you thought about what you will do with the money you have once you don't have debt?

[goldengirlz]

I agree — I’d be inclined to pay it all off and top off your retirement. That leaves another $70-100k to create a nest egg. And if you want to skim some off the top, no one would judge you for that.

The one thing I’d look into before selling is taxes. That might change my opinion a bit if selling means you’ll get hit with a bill come April. This is enough money that it might make sense to consult a financial or tax advisor.

I’m sorry about your loss.

[Deleted]

The money is sentimental because these stocks have been in my family for around a hundred years per my sister. No idea if this is true but my grandmother lived off some of the dividends for the last 20 years. No idea if there's better vehicle for the money or not.

My student loans and my car loan is actually less interest than what I earn on the market for my 401k so I assume keeping the stock and paying off my loans with my side job (which is what I intended pre-inheritance) at 1k a month would be better than tossing away stocks? I could easily do a lump payment into my 401k to catch up.

Paying off all debt would free up $600 plus free up all the side gig job money. I would fund my efund then and put all side money into my 401k to max it out.

I wish it was just straight up money so I could deal with this easier than heming and hawing if I want to sell off stock.

[tealblue]

I don’t think your plan is bad at all. I would pay the debt that makes you comfortable and then shift the $ you were paying on debt into an emergency fund/savings. When you are comfortable with the savings account, increase your retirement or open a Roth.

It’s been a long time since my tax class, but I think the stock basis would be the value on the date of death, so hopefully you wouldn’t have too much of a gain/loss on the ones you sell. Do you have a financial advisor? He/she would be able to help you with opening accounts or transferring the accounts to them, along with opening retirement accounts and advising your plan.

[sadlebred]

USAA offers free financial advice that is often free for members. I'd give them a call and ask for guidance.

[jwright]

Nov 21, 2019 21:57:04 GMT -5 tealblue said:

I don’t think your plan is bad at all. I would pay the debt that makes you comfortable and then shift the $ you were paying on debt into an emergency fund/savings. When you are comfortable with the savings account, increase your retirement or open a Roth.

It’s been a long time since my tax class, but I think the stock basis would be the value on the date of death, so hopefully you wouldn’t have too much of a gain/loss on the ones you sell. Do you have a financial advisor? He/she would be able to help you with opening accounts or transferring the accounts to them, along with opening retirement accounts and advising your plan.

Agree; you should get a step up in basis on the stocks so capital gains if you opt to sell would be minimal. 

[Deleted]

Nov 21, 2019 22:43:56 GMT -5 sadlebred said:

USAA offers free financial advice that is often free for members. I'd give them a call and ask for guidance.

Thank you! I will. I didn't know if it was best to move the money to USAA and I didn't know if this amount of money was worth paying for advice. I have a financial adviser via Wells Fargo but it's also not free. I think he charges in quarter or half hour increments of $35.  Yikes. 

[k3am]

@lemonlover, the firm that handles our taxes also has a branch that does financial planning and we've sat with them a couple times at no cost to go over some options/strategies. They (of course) tried to sell us on investments at each meeting (which we didn't take - and let them know prior to the second meeting that we probably weren't interested in signing up but would be willing to pay for), and it was really helpful for us just to have a neutral party look at our finances and give us some guidance.

All that to say, it doesn't hurt to get advice from a professional. Even if you end up paying for it, it could still be worth it.

[imojoebunny]

Sorry for the loss of your loved one.

I read this the other day, and it may be of some value to you.
www.kiplinger.com/article/investing/T064-C000-S002-smart-ways-to-handle-an-inheritance.html

In your shoes, I would pay off the consumer debt, and maybe the half of the student loans at the higher interest rate. I would invest the rest, and move the maximum each year to an IRA and/or Roth IRA, as you are legally allowed (depends on your income), to maximize the long term tax benefit. You should have around +/-$3K a year in extra cash by paying off the debt, which will be a nice treat.

Having $100K now (don't know how old you are) to invest is a nice windfall, and could easily be a million dollars or more, in retirement, if invested well. Do not be sentimental about stocks, they are not heirlooms to be cherished. I could regale you with stories of families that lost fortunes with that attitude about "blue chip" stocks, that are no longer worth anything, Kodak for example, but what you want to do, is have a diverse portfolio, and for you, mutual funds that fit your risk profile, might be a more comfortable way to invest, at least in the short term.

[dexteroni]

I'm sorry for your loss. I'm in a somewhat similar situation now - I inherited some stocks last year that hold as much sentimental value for me as they do financial value. My situation is slightly different (much smaller amount and no debt), but I can relate.

I agree that it would be so much easier if it were all cash. But because it's stock, and because there's sentiment attached, I would also proceed more carefully. I think the first thing I would do is research the stock or stocks' performance history and dividend payments. How much it actually earns would be a big factor in my decision making. No matter how the stock performs, I would for sure sell enough to pay off the consumer debt, because the stock isn't going to earn enough to outpace those interest rates. The car and student loans are in a gray area for me. I would calculate how long it would take to pay them off using the stock dividends, how much interest I would pay during that time, and how much future earnings I'm likely to lose if I sold that amount in stock. With that info I think I would feel able to make a more informed decision.

[RockNVoll]

Based on everything you've said, I recommend you invest in some good advice from a professional.  Find a financial advisor that's a fiduciary (napfa.org), which means they have to put your best interests first and can't, for instance, extol the virtues of some investment because they happen to be getting a high commission on it.  A good advisor can look at all your info in detail and then create a plan that meets your goals, risk tolerance, and generally empowers you with knowledge.

I also want to say that I'm particularly wary of the idea of a stock as something to hold onto for sentimental value.  As others have pointed out, there's no guarantee that it will actually keep growing.  Diversification is your friend.

[Deleted]

Thank you guys. The article was helpful, imojoebunny. And yes, you're all right the stock should not be held on to out of obligation/sentimental value. RockNVoll,thank you for the recommendation. This what I need, more education on how this money will work best for me and give me comfort in life. My grandma was very fiscally responsible (this was an irrevocable trust made by my grandfather to which my grandfather, father, and now grandmother all passed away for me to even receive). I'm pretty sure she would want me to utilize it in a way that brings me peace and comfort.

So I'm going to look into a financial advisor and speak with them to help me figure out what's best for my money. Thanks, guys!

[jlt19]

I get it being sentimental. And it still can be even if you sell it. My grandparents left me a similar amount in cash and I had a lot of cc debt at the time. I paid it off and felt weird about it but promised myself that I wouldn't go back into cc debt again (barring an emergency). I didnt want their hard earned savings to be thrown away on nothing. It's been nearly 13 years and I'm proud to say I've not paid$1 in cc interest since.

All that to say, even if you don't keep that exact stock, investing the proceeds to build more wealth is still "keeping it alive".

[farmvillelover]

I’m sorry for your loss. Everyone gave great advice. I’d personally:
- Wipe out all debt
- Set aside enough to fund a Roth for this year and next
- divert the monthly money saved by paying off your debt into automated savings/investments
- put aside a few K for an emergency fund if you don’t have one already
- keep roughly 10-20% of the stocks and diversify the remaining 80-90% in low cost index funds

I really want to stress that if you go to an advisor, please don’t let them convince you that whole or permanent life insurance (and beware, because they call it a few different names now in an attempt to get it to sell better) is a good idea. Spoiler: it’s not.

[Shreddingbetty]

Nov 23, 2019 14:17:44 GMT -5 farmvillelover said:

I’m sorry for your loss. Everyone gave great advice. I’d personally:
- Wipe out all debt
- Set aside enough to fund a Roth for this year and next
- divert the monthly money saved by paying off your debt into automated savings/investments
- put aside a few K for an emergency fund if you don’t have one already
- keep roughly 10-20% of the stocks and diversify the remaining 80-90% in low cost index funds

I really want to stress that if you go to an advisor, please don’t let them convince you that whole or permanent life insurance (and beware, because they call it a few different names now in an attempt to get it to sell better) is a good idea. Spoiler: it’s not.

Can you explain why this is? Mine recommended it to eventually be able to “borrow” against it later in life without having to pay it back basically. It has been a while since we discussed it so I can’t remember all the ins and outs.  I have been with him for a year and he hasn’t been pushy about it

Also @lemonlover , I got a fair amount of money in the divorce including IRA and stock. I just had to open up an account with each to easily transfer the money. As soon as The money was transferred  I transferred it out and closed the accounts.

[tres3]

I'm not sure I would pay off the SLs given the low interest rates and that the stocks are dividend producing.

The only debt we have is our SLs. We've paid off our cars, house, etc but we kept the SLs for a couple reasons. the interest rate is super low and we could do better putting our $$ towards other investments and because SLs are dischargeable at death

[ohgillian]

I think you've gotten solid advice here already. I wanted to say that it's common and not scammy for WF to make you open an account in your name there to receive the assets. I'm not saying that's the only way it can be done, but that's what Morgan Stanley did with me; they were splitting the assets from 1 account into 3 of us and we all had to open accounts at least as a temporary holding spot in our names.

Also I'll echo what someone said upthread; your cost basis is the value on the date of the person's death. (Even if you didn't get the inheritance on that date.)

[Deleted]

So I signed up for a free financial management session with my bank. I trust my bank and really like them (USAA). I have compiled some questions such as liquidation of some of it, diversifying into longer funds, some quicker funds for emergencies, etc. And see how to safely diversify. I am getting the higher end of what was expected so that is rather fortunate. I also need to see about tax implications and if I should do it this year vs waiting until January to move money.

[ohgillian]

Nov 26, 2019 8:17:52 GMT -5 @lemonlover said:

So I signed up for a free financial management session with my bank. I trust my bank and really like them (USAA). I have compiled some questions such as liquidation of some of it, diversifying into longer funds, some quicker funds for emergencies, etc. And see how to safely diversify. I am getting the higher end of what was expected so that is rather fortunate. I also need to see about tax implications and if I should do it this year vs waiting until January to move money.

This is a smart move. USAA has good financial planners. I will say that I had my investments there for several years and didn't find them very good at investing. This board encouraged me to move to Vanguard and it has been much, much better for me. But definitely using USAA for financial advice is fine. They have great folks as you already know. 

[mich1]

Nov 26, 2019 9:28:03 GMT -5 ohgillian said:

Nov 26, 2019 8:17:52 GMT -5 @lemonlover said:

So I signed up for a free financial management session with my bank. I trust my bank and really like them (USAA). I have compiled some questions such as liquidation of some of it, diversifying into longer funds, some quicker funds for emergencies, etc. And see how to safely diversify. I am getting the higher end of what was expected so that is rather fortunate. I also need to see about tax implications and if I should do it this year vs waiting until January to move money.

This is a smart move. USAA has good financial planners. I will say that I had my investments there for several years and didn't find them very good at investing. This board encouraged me to move to Vanguard and it has been much, much better for me. But definitely using USAA for financial advice is fine. They have great folks as you already know. 

I was just about to suggest this.  As a bank, USAA is fantastic, same with insurance.  But my investment accounts are not there, I wouldn't use them for that.  

ETA:  I might pay off the consumer debt, but your car and your student loans are at an interest rate that is much lower than what you'd likely be getting from investments.  Once your consumer debt is gone, you'd have $1000/mo to throw at your student loan and car and keep most of your investments intact.   You could have those paid down in less than 2 years, and bolster up savings for another car in the future after they are paid off.  JMHO.