I can foresee having lots of “what not to dos” so I’m numbering them. Here’s number one, which may not be of use to most people. Only people who in their young adulthood inherit 1.1 million dollars.
That was us. My husband’s parents did well with some investments and he, the only child, inherited everything when they had both passed. We were expecting a life of struggling, and then this bounty came along. We weren’t quite sure what to do, but fella had a friend who ran a big investment fund; so we put the money with him. Fella bought a BMW with cash. Otherwise we went along as usual for a year until I insisted we buy a house.
We were about 35 and about to have our first kid. The sensible thing seemed to be to get a mortgage for a $250,000 house. That seemed sensible.
Now I realize we were crazy. That mortgage came with a very long duration of interest payments.
Maybe we thought the real estate market was going to lag the stock market and this would be smart? Huh? I think we simply weren’t thinking. In any case, for the next decade we sold that house then bought another, sold it, then bought another as we moved from one state to another for jobs.
At every step we had these huge mortgage payments, which we would not have had if we had paid for that first house and subsequent houses outright. Those mortgage payments were at least 70% interest. We could have socked that money we were paying toward interest instead into investments. Moreover, the big mortgage payments — coupled with our failure to properly budget — led to us taking out $3,000 a month from our inheritance. And then in 2008, it was all gone.
Oh, stupid us.
Now I know — so let me pass this on to anyone in such a lovely situation of inheriting a chunk of cash: DO NOT take out a loan for a house; pay cash. Do whatever you can not to owe The Man any interest whatsoever. It is not in your interest. Only his.