Small inheritance - what to do with it?

[sigamy]

I guess I'm looking for some advice/opinions, which I will probably later ignore ().

I received a small inheritance from my grandmother. About $5,000.

We are in a house we can't afford, living paycheck to paycheck. High mortgage, expensive cable TV, fancy cellphones for family, typical stuff that "we can't live without". We have one leased vehicle and one ten year old small sedan. CC balance of about $2200.

So...against all wisdom and Dave Ramsey-ness, I want to take this money and do some renovations to our family room. Maybe spend $4000--new entertainment center, area rug, new shades for windows. My thinking is that I want something *tangible* that I can look back at, remember, and say, "that came from gram".

If I use the money for bills, or keep as emergency fund, I worry that we will be undisciplined and use the money on clothes, eating out, etc. By end of the year the money will be gone and we will have nothing tangible left. We will be right back to living paycheck to paycheck and not have the improvements to the house. I will feel that I wasted the inheritance.

I know this is mainly a "grow up and be disciplined" situation. But looking for some opinions on what others would do.

[Fishindude77]

That's foolish. If you're going to get rid of the cash you may as well clean up some bills with it.

[disneysteve]

We are in a house we can't afford, living paycheck to paycheck. High mortgage, expensive cable TV, fancy cellphones for family, typical stuff that "we can't live without". We have one leased vehicle and one ten year old small sedan. CC balance of about $2200.

I want to take this money and do some renovations

The fact that you're first thought for this money is to spend it on more stuff you don't need and can't afford pretty much sums up why you are in the situation you are in.

What would I do in your shoes?
1. Pay off the credit card.
2. Set aside $1,000 as an EF.
3. Slash cable to the bare minimum plan.
4. Use the remaining $1,800 as starter savings to buy your next car in cash when the 10-year-old one needs replacing.

[Nutria]

So...against all wisdom

You're admitting that you're (1) deep in debt and (2) foolish.

That's good. Just like an alcoholic, you can't start to fix yourself if you don't admit your problems.

Maybe spend $4000--new entertainment center, area rug, new shades for windows. My thinking is that I want something *tangible* that I can look back at, remember, and say, "that came from gram".

How long will that stuff satisfy you before you want something new, shiny and not thread-bare? Not long.

You have memories of your grandmother; honor her by being prudent with her legacy to you.

If I use the money for bills, or keep as emergency fund, I worry that we will be undisciplined and use the money on clothes, eating out, etc. By end of the year the money will be gone and we will have nothing tangible left. We will be right back to living paycheck to paycheck and not have the improvements to the house. I will feel that I wasted the inheritance.

Those are all completely valid concerns. But your solution is to give up before you even start.

When you and your Significant Other stare at that $5,000 ask yourselves where you REALLY want to be next August: still drowning in debt while living one economic bump from disaster, or do you want some control in your life?

[snafu]

I know this is mainly a "grow up and be disciplined" situation. But looking for some opinions on what others would do.

The reality is life challenges happen, things go awry and you are one paycheque from disaster. Financial issues tear families apart but grandmother gifted you the opportunity to make changes that will result in long term gains. I don't see an entertainment unit, rug and drapes as honoring grandmother.

I suggest you temporarily park your inheritance in a Money Market account because it's a trifle harder to get at than a regular savings account. You really need an Emergency Fund, so I suggest a family conference to explain that sums ordinarily used to eat out/take-out, need to go to an EF until $ 1,000. [Dave R, 1st step] has been accumulated and added to initial inheritance MM account. Ask for co operation and help with chores.

Create a basic menu plan initially based on 5 favorite meals of each family member. [Home made meals cost 1/5th of restaurant meals, give yourself the tip] Create a basic spreadsheet and examine where your money is going. What is the allocation of your high mortgage payment? How many $$$ to interest, principal, municipal tax, mortgage insurance, household insurance etc? What is charged on CC? auto operations, eating out and? How much interest is added?

We're here ready to cheer your every step forward to financial security.

[Jluke]

Think about how hard it was for your grandmother to save $5000? maybe 5k was nothing to her... I don't know that.

However, the fact that she was responsible and saved it probably would imply that she'd want you to do something responsible with that money.

[disneysteve]

the fact that she was responsible and saved it probably would imply that she'd want you to do something responsible with that money.

I think the best way to honor her memory is to use her gift to better your lives, not get new curtains.

[phantom]

You've already said that you're living in a house you can't afford. The last thing you want to do when you're living in a house you can't afford is create deeper emotional ties to it. Do you really want to find yourselves saying, "We need to move, but it would mean losing those beautiful window shades gran's money paid for?" As for entertainment centers and rugs, while it's those are things you can take with you, they're not things that last particularly long.

I think that using this money to fix your financial life would be a wonderful way to honor your grandmother. Pay off that credit card debt, cut up the credit cards, and get yourself a debit card with your grandmother's picture on it. Then every time you're tempted to pull out that card for clothes or a meal out, let her picture remind you that you're honoring her memory by turning your financial life around.

[bjl584]

Sounds like you already know what you should do with the $5000.

My advice is to do with it what you need to do. Not what you want to do.