But one day she mentioned that they were going to have to borrow most of their down payment from her parents. She was unbelievably embarrassed to do so, because now her parents would know that she and her husband had blown the entire amount! I don't know how they spent all that money. I do recall they had a ski boat and an old truck to pull it with and their kids had a lot of cool toys, but beyond that I couldn't see where it had all gone.
I've often thought of my friend during these past 25 years. What COULD they have done with that much money that would have been smart? In reality, the possibilities were endless, but here are three super frugal choices.
1. Bury it in their backyard or put it in a safety deposit box. In 5 years they would still have had their $50,000.
2. Put it in the bank. In the mid 1980's an average money market account earned 7.71% (these were the high interest Jimmy Carter years -- great if you had money to invest, horrible if you needed to borrow it) and at the end of five years they would have had over $73,000.
3. Buy a house. In the 1980's, $50,000 would have been a hefty down payment on a starter home.
What would you do if you suddenly found yourself with a large amount of money right now?
I'd put a nice, fat, payment into my mortgage. Lower the principle by a whole heck of a lot, which will in turn lower my interest payments, giving my regular payments more bang for the buck. We're currently paying double payments and plan to pay off our 30-year mortgage in 7-8 years. A windfall would certainly shorten that dramatically.
ReplyDeleteNow I'm sad I don't have a sudden windfall. :)
Pay down student loans! And increase our life insurance, and invest in a CD to put towards a house or emergency fund. Oh the possibilities... What a great blog you ladies have! I love it.
ReplyDeleteI'd either put use it for a down payment on a house (although I don't have a house in mind at the moment), or put it in a money market account with the intent of using it for a down payment. Also, we will soon need to upgrade one of our vehicles, so that might be a viable option as well, but the house would definitely be the priority.
ReplyDeleteI'd pay off student loans and then throw as much of it as I could towards the principle on our house, and then sell the house. :) (We're trying to move right now and because of the economy we can't sell our house so we're just having to rent it out to someone, and because we can't sell we also can't buy a house where we're going either so we have to rent on that end.)
ReplyDeletedown payment on a house for sure!!! its tough scriping it togehter but we'll do it!! (still crossing my fingers that 50k will come my way:)
ReplyDeleteInteresting how many people would put it towards their house.. hahaha, apparently that's where all of our money goes. :) We'd pay off the house first, save a huge chunk second, and go on a cruise third. You gotta party at least a little bit.
ReplyDeletePay off our student loans. That is currently our number 1 priority.
ReplyDeleteThe "what would I do with a large amount of 'free' money" is probably my favorite fantasy. If I had about $50,000 right now, I would pay off my small students loans, save for the rest of my tuition (only about $1,500 left), buy a baby-friendly car, and save the remaining $20-25,000 for a house down-payment.
ReplyDeleteThis post is hilariously ironic since the start-up my husband works for is just days away from being bought by a huge company. Sadly the windfall is always much less after taxes:-(
ReplyDeleteWe are planning on using a little bit to celebrate and the rest is going in a trust for our children. We are currently working towards the goal of paying off our home but we did not consider using the $$ for that purpose. After reading everyone's responses I can see that we are totally splurging even though we are saving almost all of it.
I'd finish my emergency fund, take a nice vacation, and put the rest toward a home down payment.
ReplyDeleteWe'd use it to pay off a huge chunk of student debt (We've just taken out our last student loan! Yay!), and then put the rest in savings to prepare for a down payment.
ReplyDeleteI was actually just dreaming about this yesterday when I entered to win HGTV's Urban Oasis. If I happened to win that (which of course I won't, but it's fun to dream), I would probably opt for the 850,000 cash payout instead of the million dollar pad in NYC (although I would discuss my options with someone who knows what they're talking about first). With the money I would first and foremost pay my church. Then, I would use the money to upgrade to a better neighborhood and a slightly nicer home (nothing too fancy), by selling our current home and making up the difference with the money we win. I would then take advantage of not having a house payment by sending my husband back to school for either his MBA or a teaching certificate so that he can get a job that he really loves and one where he no longer has to work 12 hour days every day. He would make a fabulous high school teacher / coach and without a house payment we could afford for him to pursue that (plus he would have the added bonus of getting summers off!). I would invest / save the rest of them money so that we could retire early and travel the world.
ReplyDeleteNotice, I didn't say anything about paying taxes... it is a dream after all!
A windfall is a nice thought, isn't it? We'd probably pay off our mortgage and save the rest for the next downpayment (we'd like to buy a small farm, or at least some land that we could farm). We're already paying extra on our current mortgage so that we can save ourselves interest charges in the long run. I'm a nerd; I enjoy figuring out how each extra dollar to the principle can save us in the long run. :)
ReplyDelete1. Buy a carton of ice cream.
ReplyDelete2. Buy a few of the baby things I want but can't afford.
3. Replenish our emergency fund to have at least 3 months easy access.
4. Put a healthy chunk in our Mutual Fund.
5. Put the rest towards law school to reduce student loans.
Ah, wouldn't it be nice??
I'd definitely put it towards our mortgage. We want to pay it off as fast as possible!
ReplyDeleteAwe I love this question. I ponder it often. I would landscape our backyard free of anxiety. Since we don't have any debt I would probably stick most of it into savings but go on a big trip.
ReplyDeleteI have come to the conclusion that I would for sure still live very modestly because we've had the same lifestyle before my husbands raises etc. I'll always be a tight wad :)
Pay bills then it would depend on the amount of money. We'd have to decide whether to tear down our house, sell the lot, and buy newer, or have the foundation fixed and stay where we are. Oh, we desperately need a newer pickup/SUV.
ReplyDeleteI would do the same as Tianna. We too are making extra payments a month to get it paid down. it will be nice to not have to worry about a house payment. Once the house is paid for start sticking that amount away each month, like we are still paying a house payment. We can have a nice retirement when the time comes.
ReplyDeleteoh $50k would be a wonderful thing. I would pay off ALL my debt - Car, student loans, and credit card. I would put a little away for my rainy day fund, and the rest to my IRA! How nice would that be -- to be totaly debt free.
ReplyDelete