What Financial Planners Say She Should Do
Sunday, December 24, 2006; Page F04
What Financial Planners Say She Should Do
Mary Malgoire of the Family Firm in Bethesda
Updated Financial Features |
• · Before deciding what to do with the money, Cindy needs to do a cash-flow analysis. Until that is done, she should deposit the inheritance into a money-market account from which she pays down debt. She can also save back into that same account any debt payments she no longer makes.
· She needs to take a hard look at her credit-card debt and other loans. Paying down her debt with her inheritance only to build it up a few months later would be counterproductive. She and her boyfriend should examine a year's worth of past credit card bills. Are most charges related to renovations? How many are daily living expenses? If the SUV loan and second mortgage were paid off, would that free up cash and cut credit card use?
Once her cash flow is understood, Cindy can consider how to use the inheritance. Here are some ways she can take some risk out of her situation:
· Pay off the 9 percent loan on the house and lower the payment on the SUV or pay it off. Whenever she pays off a loan, she should keep writing a check for the monthly payment and put that money in a savings account. In two years, she could have a nice nest egg.
· Budget renovations carefully. My overall impression is that the work could add much more to the value of the house than the $50,000 she projects. Rental income sounds very good, so perhaps this particular property is, indeed, the best place to invest money. Do the minimum necessary as quickly as possible to get the entire property rented.
