What would you do with an unexpected gift of $13,000, one that came with absolutely no strings attached? That’s the question I asked you a few months ago, after my grandmother gave my husband and me $13,000 in cash as she tried to find a way to avoid a potential hike on estate taxes. You responded with comments like these:
“I don’t need it for a down payment, so I would invest it. I would probably pick a safe (less risky) mutual fund.”
Mandy at MoneyMasterMom had this advice:
“Do you have a mortgage on your current home? Do you have prepayment options? I know the US tax system creates a preference for keeping big mortgages with interest being tax deductible, but putting it on your mortgage is like putting it toward the down payment of your next house.”
Jon from Reed Reads suggested:
“If it was me, I would do a combination of option 1 and 2… divert maybe half of it to the 401K (through higher allocation), and half to a down payment fund.”
But it was Catherine from Plunged In Debt‘s comment that really inspired me. She wrote:
“Assuming I was debt free, I would probably take 3k and do something fun with my family (vacation probably) and invest the other 10k, or put it into home renovations.”
The fact is, my family and I rarely spend money on ourselves. When it comes to the battle to save vs spend, splurging is always ruled out almost instantaneously. If you look at the four options I outlined in my October post, you’ll see that splurging was only an afterthought at the very bottom, one that was completely discounted as “not gonna happen.” Sure, we considered things like saving for a down payment on our next home (a far off dream, considering our current home is no longer on the market), maxing out our retirement accounts, and putting it towards our kids, but spending the money on something enjoyable for ourselves was never really a possibility.
Until I read Catherine’s comment (which Jon seconded, while also asking for a follow up on our decision… hence this post!).
That’s when I realized that it was ok to have a little fun with money every now and then. My husband and I have worked hard to get to this point in our lives, where we are doing well in our careers and – finally – financially stable. In the past year, we’ve paid off our only remaining car loan as well as the last of my student loans (with the unexpected help of my parents – obviously, I am blessed with an abundantly generous family); our only remaining debt is our mortgage, and we plan to sell this house in the next year or so. Funneling any more money into it didn’t really seem like a good idea, whether by making improvements or paying down the principle.
Alright already, I can hear you all saying. What did you do with the money?
Here’s the answer:
First, we did schedule a little bit of fun for our family of four. We’ve always wanted to visit the Biltmore Estate in Asheville at Christmastime, and with this possibly being our last winter living in the South, it kind of felt like now or never. So we’re taking a trip there over the holidays. Between the hotel, the Biltmore tickets, and food costs (Asheville is a mecca for the locavore trend), it’ll cost about $1,000, leaving us with a full $12,000.
We’re putting the rest of it into our down payment for our next home – the one we’ll likely leave the South to buy – but we’re not just stashing it in our savings account. Rather, we put it into a one-year CD with a 1.1% interest rate. 12 months from now, we’ll get about $173 in interest on top of our $12k initial deposit. It’s not much, but we felt it was better than just letting our money earn basically nothing in a money market account, and less risky than putting it into a mutual fund (especially when you factor in fees).
So that’s what we did with the $13,000 in family money from my grandmother. It’s nothing all that sexy, but I think it shows how my husband and I have grown as financial beings. There was a time when I wouldn’t have even considered splurging on some fun for us, but we’ve matured to the point where we’re confident enough in our financial decisions to cast aside our tendencies to save vs spend – albeit temporarily – and enjoy ourselves.
Do you agree with our decision? Do you think the 1-year CD was the best way to let our money grow modestly and basically risk-free?