Season 3, Episode 2: “I Inherited Money. Should I Pay Off Debt, Invest It, or Blow It All on a Car?”

This week on the podcast we’re dealing with a very foreign concept for many of us: an inheritance.

It’s what happens when one of your loved ones kicks the bucket and generously leaves some of their money to you.

But what do you do with a small inheritance? Do you use it to pay off your student loans? Buy a new car? Stash it in an emergency fund? Invest the whole damn thing and say your prayers to the Oracle of Omaha?

As usual, we have THOUGHTS. Listen to the episode to get them blasted straight into your ear holes!

This week’s question

Today’s question comes to us from beloved reader Maxine. Maxine writes:

“I love your blog so much! I’m about to turn 18 and I’ve really appreciated seeing all your advice and resources. 

I was unlucky enough to have a family member die a few years back, and they left me a good amount of money (reassuring but not life-changing). I won’t have access to it until I’m 21, so this is by no means urgent, but with all my preparing for independence I’ve started thinking about what to do when I can access it. I‘ve looked at a couple of options: buy a car, pay rent for a while, set it aside for emergency funds, start my retirement account, and maybe enjoy some of it then. If I am thrifty, I could maybe do multiple of these, but certainly not all. With the caveat that I’m not sure what my situation re: debt and financial security will be in three years, what would you recommend? Thanks for reading!”

– Maxine, human-shaped entity of pure light

Our answer

Here’s more of our sage nuggets on this topic:

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Episode transcript (click to reveal)

Kitty 0:00

This episode, like all episodes, is brought to you by our Patreon donors. So this time, thanks go to Tracy, Maria, Anna, Diana, Daniella, Sarah, Kevin, Lisa, Mara, Maggie, Katie, and Emma. And an extra-special thanks to: Amanda, Claire, Kim, and Lan. Amanda is a prismatic beauty of a mantis shrimp. Claire has the adamantine body armor of a mantis shrimp. Kim has the steadfast monogamous heart of a mantis shrimp. And Lan has the deadly left hook of a mantis shrimp. Guys, Don’t be shellfish, ya gotta join our Patreon, okay? Ahahaha, I krill myself myself, I’m so cray-cray, ha HA…

Piggy 0:53

So speaking of generational conflict, my aunt asked me to edit her resume the other day. Why have we let the Baby Boomers be in charge for so long?

Kitty 1:04

I saw it because you forwarded it to me. Do you know what my favorite one was? It wasn’t that it was 1 page and ¼. It was not that it was written sometimes single-space and sometimes double-space. There were so many stellar, stellar things about this resume, but my absolute favorite. Do you remember what the last word on the resume was?

Piggy 1:28

I sure do. Well, the last line was education, and it was the community college where she went, and the last word was, in all caps, LOL.

Kitty 1:38

It was incredible. Incredible! I was like this is the confirmation that I needed, everything that I know about Baby Boomers has just been validated, validated by your aunt.

Piggy 1:51

100%. So I edited it, and formatted it and made it comprehensible, got rid of the word LOL after her education, added her actual email address.

Kitty 2:04

You know advanced, high-level resume-building techniques that only a personal finance guru would possibly know.

Piggy 2:11

Exactly. Only a professional editor could have done this for her.

Kitty 2:14

I want our younger listeners in particular to hear this.

Piggy 2:19

And know that you have skills!

Kitty 2:21

I have met so many kids who are still in school who say I don’t have any skills. And I’m like put any program on there. Any program. If you’ve used it once, put it on there.

Piggy 2:33

Yes.

Kitty 2:34

And they’re like well I’m not an expert at Microsoft Excel and I’m like you don’t know the things I’ve seen!

Theme Song 2:38

If you need some dough
You don’t know where to go
In this patriarchal capitalist hellscape

Well here’s the ‘sitch
We’re gonna help you, sis
Because bitches get riches

Bitches get riches
Bitches get riches
Bitches get riches
And so can you

Kitty 3:09

And for the 7 Baby Boomers who are listening right now–

Piggy 3:15

We love you.

Kitty 3:16

We love you, and you need to know your worth. Because your peers, are not giving you much competition. That’s all I’m going to say.

Piggy 3:24

No, they certainly are not. If you can download a podcast and listen to it, you’re ahead of 90% of your peers and we are so proud of you.

Kitty 3:33

Honestly, I know not only do we have Baby Boomer fans, we have Silent Generation fans.

Piggy 3:41

We do!

Kitty 3:42

So you know what, fuck it. If you’re listening to this right now, you’re in the cool kids’ club.

Piggy 3:44

Yeah, exactly.

Kitty 3:45

That’s our ruling.

Piggy 3:46

We love and admire you.

Kitty 3:47

We have great power in this place because I’m Kitty.

Piggy 3:50

And I’m Piggy.

Kitty 3:51

And we’re the Bitches in Bitches Get Riches.

Piggy 3:54

We’re a pair of jaded misanthropes who revel in bringing down the mood.

Kitty 4:00

Yeah, and we’re here to tell you nothing matters, it’s all hopeless, and the only thing that’s certain is the inevitable heat death of the universe, man.

Piggy 4:11

Our time on this planet is limited.

Kitty 4:13

So let’s get started.

Piggy 4:15

Today’s question comes to us from beloved reader Maxine. Maxine writes: I love your blog so much! Aw, thank you!

Kitty 4:23

Thank you thank you!

Piggy 4:24

Thank you so much! I’m about to turn 18 and I’ve really appreciated seeing all your advice and resources. I was unlucky enough to have a family member die a few years back, and they left me a good amount of money, reassuring but not life-changing. I won’t have access to it until I’m 21, so this is by no means urgent, but with all my preparing for independence I’ve started thinking about what to do when I can access it. I’ve looked at a couple of options: buy a car, pay rent for a while, set it aside for emergency funds, start my retirement account, and maybe enjoy some of it then. If I am thrifty, I could maybe do multiple of these, but certainly not all. With the caveat that I’m not sure what my situation re: debt and financial security will be in 3 years, what would you recommend? Thanks for reading.

Kitty 5:09

First of all, I just want to say, hell yeah your name is Maxine.

Piggy 5:12

Maxiiiiine. Maxiiiiine.

Kitty 5:14

That is a powerful, cool person name. Great job. That’s the question, right?

Piggy 5:20

Bitches out!

Kitty 5:21

This has been Rate My Name.

Piggy 5:24

With Kitty and Piggy.

Kitty 5:27

Okay, so for my own purposes, I’m going to mentally assign a number here. Maxine did not provide us with a number but I’m thinking like 20,000?

Piggy 5:36

My gut reaction was 15,000.

Kitty 5:38

Okay, yeah.

Piggy 5:39

15 to 20,000.

Kitty 5:41

So I have a feeling about this, and tell me if you agree. So I have not yet received an inheritance of any kind.

Piggy 5:51

Samsies. What’s an inheritance?

Kitty 5:55

I know. My parents are still living. My maternal grandparents have passed away but they did not leave anything to their grandchildren, so I don’t have direct experience with this. However I do have a paternal grandfather who is definitely getting up there, he’s in his late 80s. And he and I are super close. So starting when I was about 8 years old, I lived a mile bike ride at the time from my paternal grandparents. And grandpa invited me over and he said he had something important, so I rode my bike over. And he wanted me to go through the house, his house, and mark down what items I wanted when, in his own words, I’m dead. Which will be soon.

Piggy 6:38

What?!

Kitty 6:39

So I am like 8 years old, going through Grandma and Grandpa’s house. And they expect me to literally point at things and say ah, this antique floor mirror, I’d like that, please. It’s solid oak. Like what? I’ve been preparing, I’ve been preparing.

Piggy 6:57

So I also have not received a cash inheritance, probably won’t ever. But I do want to say it amuses me to no end the difference in the generations where it comes to inheriting things. Cause my mother-in-law comes from a blue blood New England Protestant WASP-y family, I am too spicy for their blood. She’s always like, do you want this antique chifforobe? What about this marbletop? And I’m like the fuck is a marbletop? But no, they’re always like and here’s the silver. They gave my husband the antique silver, and he was like how quickly and easily can I pawn this for cash? So to circle back, I feel like your family is doing you a wonderful service by allowing you to inherit cash instead of trying to pawn off large, heavy, unwieldy pieces of furniture on you.

Kitty 7:47

Leaving a cash inheritance is very, very thoughtful. So I think there’s basically two great ways to spend that money. One of them is to do something that you would enjoy and the other is to do something that the person who gifted you that money would enjoy. So my grandfather, Grandpa Larry whom I love very much, has indicated to me that when he passes away I will be getting an inheritance. I don’t know what amount that will be, don’t really care. But I came back to him and I told him, I want to tell you when you pass away, what I’m going to do with that money because I think it would bring you a lot of joy to know. And ultimately what I decided was—my grandpa Larry grew up very much in love with the Old West. He always gave me the opportunity to go ride horses, and we spent a summer in Texas when I was a kid visiting a dude ranch, and those were always the sorts of activities we did together. And so I’ve told him. I did some research. There are places that sell vacation packages where you go on cattle drives and you’re riding a horse for eight hours a day as you’re driving these cattle from one location to another. I was like Grandpa, when you pass on, I will do something responsible with most of that money but I’m going to take a piece of it and I’m going to go on a cattle drive and I’m going to think of you every day.

Piggy 9:20

Nice.

Kitty 9:22

When someone has passed on, they can’t know how much that money meant to you. And it sounds like this is already the case for Maxine, but I’m telling our other listeners because I think this is valuable. If someone does you the courtesy of telling you, hey head’s up I’m going to try and leave you some money when I pass on, I think it’s really special if you can tell them now how meaningful that is and how  even if you’re going to use most of it to pay off student loans or jump start your retirement account or pay off your car or whatever, even if it’s something mundane. Take a portion of it and just do something—tell them, promise them I’m going to do something that’s going to thrill you to know I’m going to spend your money this way. That’s my thinking. How do you feel about that?

Piggy 10:08

I think that’s lovely. You don’t have to spend the whole thing on it, but making a donation in the name of your loved one who left you that money, that’s beautiful. If someone made a donation to Planned Parenthood in my honor, I would fucking love that.

Kitty 10:25

So touched!

Piggy 10:36

If someone donated to the Sierra Club in my honor? Mwah! Now, I do think 21 is a young age. It’s also an age when you are very cash-strapped. So I can see two ways of looking at this. The first one is, bank that shit. Just put it away in either a CD, that’s a certificate of deposit, a HYSA, that’s a high-yield savings account, or a standard brokerage account, and that is for investing novices.

Kitty 10:57

Quote-unquote investing.

Piggy 10:59

That’s like your access to the stock market. And just sit on it for a year, while you’re thinking. And that way it’ll grow to differing degrees depending on which vehicle you put it in. But set it aside, let it grow, while you’re figuring out what your life will be. Because I remember at 21, I was not quite sure what I was going to do with myself. So I do think that you need to honor that transitionary part of your life. And there is nothing wrong, there is absolutely nothing wrong with sticking that cash somewhere where it’s going to be relatively safe and still grow a little bit in a way that you’re not going to feel pressure to use it right away.

Kitty 11:38

So the difference between all of those things is basically if you think you need to access the cash quickly, keep it in a high-yield savings account.

Piggy 11:47

Yes.

Kitty 11:48

If you think you might want to use it not this month but maybe next year, then a CD is a good choice. And only open a brokerage account, only begin actually investing that money in the stock market, if you don’t think you need it for the next three years. That would be how I would break that out.

Piggy 12:07

That’s a great way to put it. But any way you slice it, if you bank that in a safe vehicle, you can come back to it to buy that car, to pay rent for a while, to start a retirement account, enjoy some of it. Actually, you know what I am going to say—after you make your donation or do something with it that will be in honor of the person who gifted it to you, I do think you should set aside another little chunk of it to enjoy. And I don’t mean buy-a-car enjoy, I mean like go on a fancy dinner. Take your friends out for drinks, a small evening out to enjoy it, obviously spend that. We’ve talked before how you should enjoy your money. You shouldn’t waste it, you shouldn’t splurge it by any means, but little luxuries, small joys are well worth it because it keeps your spirits up. It reminds you of what you’re working hard for. It’s okay to buy the $7 chocolate bar, it’s okay to take your friends out to the bar for a night if you have this windfall of cash. Don’t feel any fucking guilt about that.

Kitty 13:18

Intentionality is the key.

Piggy 13:22

Yeah. And that kinda reminds me. I have a friend who about 5 years ago inherited some money. His father passed away and he inherited $30,000 and a car. So he didn’t approach it with any kind of intentionality. And he frittered it away…that sounds so judgmental but he literally frittered it away.

Kitty 13:40

He bought lots of fritters.

Piggy 13:42

He bought so many fucking fritters.

Kitty 13:44

Apple fritters. Elephant ears, the whole sitch.

Piggy 13:46

Yeah, apple fritters. He loaned money to a girlfriend who ended up breaking up with him and not paying it back, he bought a keyboard and piano lessons and then gave up after 6 months. So he had an opportunity when his father passed to use that money to better his situation for the future. And instead he kind of wandered aimlessly. And honestly, maybe that was a symptom of grief. But really, in my impression as a friend, he just didn’t know how to properly utilize that to give himself a better life. He could have even used it to start his own business to really throw himself into pursuing his dream career in his dream industry. Instead, the money’s gone and so is his dad.

Kitty 14:37

Even if you are the kind of person who you got a little inheritance from some great aunt somewhere and you did fritter it away. Guess what? Life offers us endless opportunities to make more money. You’re not doomed forever because you have made foolish financial decisions in the past. You can always start to recover and turn that around. It’s very interesting that Maxine chose the phrase “the amount of money is reassuring but not life-changing.” And I understand what Maxine means by that, but I also think it’s so important to note that any amount of money can become life-changing. There are some people who will spend $10,000 in one shopping trip and I don’t know those people but I have heard that they exist. And there are other people who make $10,000 in a year and doubling their income truly would be life-changing.

Piggy 15:30

There was a time in my life when $1,000 would have been life-changing.

Kitty 15:33

No matter what the size of the inheritance that you’re getting, the person who left it to you is trying to change your life. They are trying to give you a gift that will catalyze positivity in your life. So things like investing more in your retirement is a great idea, investing more in education is a great idea, maybe paying off debts or student loans, or just pursuing great life opportunities like going on a vacation or taking a gap year, or doing something selfish but enjoyable and life-affirming for yourself is better than spending it without intentionality. The fact that Maxine is coming to this question with tons of time to think about it and lots of intentionality is a mark in Maxine’s favor.

Piggy 16:16

Oh yeah, I think whatever Maxine decides to do, she’s on the right track.

Kitty 16:21

In terms of actually answering Maxine’s question, I think there’s a lot of great things to do with it. I think if buying a sensible and well-researched used car would mean the difference between being able to search in job markets only available on your local bus circuit versus being able to look in a 30 mile radius, do that. That’s a great investment.

Piggy 16:46

Absolutely.

Kitty 16:47

If you come out with student loans, maybe some of them are federal and have a low interest rate but others are private and have a higher interest rate, maybe like 5-6% and above, maybe just getting rid of those would be a pretty good investment.

Piggy 17:03

Absolutely.

Kitty 17:04

Most people will tell you that the stock market on average year over year has close to an 8% return, so a lot of people would say it’s wiser to invest that money rather than to become debt free, however—

Piggy 17:17

Ehhh…

Kitty 17:20

Exactly. You won’t be accessing that money any time soon and the profits off of it will be really small until they aren’t because hashtag the magic of compound interest.

Piggy 17:28

I do think there’s something to be said for if you’re young and you have absolutely no assets, it’s really hard to justify putting away money you’re not going to access for 50 years. I am very debt-averse, I will not accept debt in my life. That is the personal side of personal finance. I do think that’s especially important for people who are 21, do what your emotional needs require when it comes to taking on debt versus paying it off.

Kitty 17:59

And I think the worst thing you can do is to spend the money thoughtlessly. The safe option, in the middle, is to put it in a high-yield savings account and just don’t touch it and figure it out later. The very best thing you can do is to invest it in a way that does make that money become life-changing. And I think if you wait to make your decision until you feel sure that it’s the right way to use it, that’s how you know that it will be life-changing money.

I think there’s one last thing that I just want to touch on, and I’m straight up putting my old rich person hat on right now.

Piggy 18:35

Yaaas, do it.

Kitty 18:37

It has a huge feather in it, like you’ve never seen a feather.

Piggy 18:41

An ostrich feather.

Kitty 18:43

I hope not, because that’s very cruel, however I’m sure it is, ‘cause rich.

Piggy 18:48

Let’s say it’s a peacock feather, those things shed feathers like you wouldn’t believe.

Kitty 18:52

Yeah, yeah, yeah. Exactly. Alright, we’re looking great. Looking good, feeling gorgeous. I’m telling you, don’t tell people about this money. If you’re dating someone, don’t tell them about the money. If you have close friends or roommates, don’t tell them about the money. There are certain people in your life who will take advantage of that knowledge or even if they don’t ask you for money, they may treat you differently as a result of feeling like, from their perspective, you’re rich and you don’t have to do anything. Even if the amount of money is pretty small, there are some people who will react to any kind of inherited wealth with that kind of contempt for the person inheriting it. So this is rich person hard-won wisdom, I would keep that information entirely to yourself for now.

Piggy 19:46

You lose nothing by not crowd-sourcing your advice on this. I know you’re kind of crowd-sourcing by calling in to us—

Kitty 19:53

Yeah, but we’re cool.

Piggy 19:55

We’re cool motherfuckers. Your secrets are safe with us, Maxine Maxinovitch, if that is your real name! But your point stands, don’t be influenced or guilted by the people around you. Be influenced by us, your creepy, internet aunties.

Kitty 20:11

Exactly! Wait, hold on, we answered this question all wrong.

Piggy 20:17

We did?

Kitty 20:18

Maxine, you should consider upping your Patreon tier! Guys, we’re hungry, our guinea pigs are starving over here!

Piggy 20:26

We have chickens to put through college!

Kitty 20:30

Exactly. And believe me, they’re all looking at careers that require doctorates. It’s going to cost a pretty penny. Are you good with that?

Piggy 20:39

I am so good with that.

Kitty 20:41

Listeners, if you want us to answer your question, go to BitchesGetRiches.com and click “Ask the Bitches.” Production of this podcast is directly tied to our total number of Patreon supporters, so if you want to hear more, join us at patreon.com/bitchesgetriches. And if you need a little more Bitches in your life (and who could blame you?), you can read our articles and follow us on social media at BitchesGetRiches.com.

Piggy 21:05

Alright, is there anything else they should know?

Kitty 21:08

Yes. Do you know what the odds are, that if you are in a room with 23 other people, that you share a birthday with someone?

Piggy 21:20

I don’t know those odds.

Kitty 21:23

Guess.

Piggy 21:24

Ummm—

Kitty 21:25

You’re wrong! It’s 50%.

Piggy 21:29

Good to know!

Kitty & Piggy 21:30

Bitches out!

2 thoughts to “Season 3, Episode 2: “I Inherited Money. Should I Pay Off Debt, Invest It, or Blow It All on a Car?””

  1. Hello BGR and Maxine!

    I’m along time reader of this blog but this will be my first time commenting. I apologize in advance for the long post, I just wanted to share my experience in the hope that it can help other people out there who might find themselves in a similar position to the one I was in not so long ago.

    I lost both my parents before I turned 30. Losing your parents as a young adult, and so close together, messes with your head in a myriad ways and there are so many things going around your head.

    And yes, one of the trickier things to navigate in this is potential inheritance. Because all of a sudden, there was this, for my standards, huge sum of cash I was about to inherit and I had no headspace to plan what to do with it at the time.

    People tend to go like “How can extra money be a problem?” or “Dang, you’re lucky! I wish I had windfall like that!” And this is when it becomes awkward, because you have to remind them that you’d actually rather have your parents back than any of this.

    Additionally, there were weird feelings around money that I hadn’t actually earned myself. A substancial part of it was actually generated by my grandparents and later passed on to my mother. I felt more like a custodian of family money than the actual rightful owner of said money.

    There can also be complicated feelings on what you spend the money on. Would mum and dad approve of this? Do they need to approve of it? Is this *worthy* enough?

    I felt quite alone in that situation, because it’s not really *socially acceptable* to talk about large sums of money. Especially money you haven’t earned, or money that makes you the (in financial terms) richest person in your social circle. Much like Kitty and Piggy said, some people might just look at you differently after they start to realize what’s going on.

    The amount I inherited was probably larger than in Maxine’s case, but I thought I’d write about what I did with it anyway, in case there are any other readers out there who find themselves a bit lost in a similar situation.

    I do want to add that what is concidered *a large amount of cash* will vary alot from person to person. To some, that will be 1000 dollars, and to others, maybe 10 000. I acknowledge that.

    Anyway, here goes. I don’t live in the US so some things might work differently for you guys but I hope you get what I’m trying to convey anyway and just take it as some sort of roadmap maybe more than a paint-by-numbers-thing.

    1. Once the inheritance was settled, all the insurance money had been claimed etc, I got it transfered into my high yield savings account. I had the stocks I inherited transfered to a brokerage acount (I use an online, low-cost bank with a very user friendly interface). And then I just let it sit there until my head was clear enough to deal with it. It took me about 8 months.
    A friend of mine who lost her parents 5 years ago did the same and still hasn’t really touched it. Also legit.

    2. In the meantime, I let myself do whatever I needed to make life a little easier. Here’s some examples:
    -I got takeout when I didn’t have the energy to cook.
    -I took an uber instead of buses if that’s what it would take to make it to a friend’s place even if I felt like the saddest blob in the universe.
    -I got my hair cut at the nice hairdressers’ because it made me feel *pretty*
    -I bought take away coffee from the hipster place on the corner with riddiculously good grinds.
    -I got a membership at a yoga place (not cheap where I live…) that became a safe space for me to literally move through my feelings and deal with tension etc.

    Life was sad enough that trying to be penny-pinching wasn’t gonna make it easier. I didn’t go crazy by any means, I just let myself off the hook for a while. I did, however, after alot of research, buy an investment wardrobe piece in the form of a designer handbag. I still love that handbag <3

    3. When I was ready, I sat down to make a plan. What do I want to do for the next years? For me, it was
    a) get a car so I'm not dependent on the train to get to work (which would save me tons of time and hassle, I commute 2 hours every day and the train schedule doesn't match well with my work hours, so the wait can easily add another hour to that…)
    b) travel for an extended period of time within 2 years (mainly just to catch up with myself after all that's happened and just live a little?!) and
    c) get a house, within 3-5 years.
    In that order. Basically, what would make my life easier/happier, and rank it from effective immediately to happier in the future.

    4. I calculated roughly how much that was going to cost me; down payment for a house, the travels, the car. I kept that money in the high-yield savings account, where I already had my emergency fund.
    Money that you want to use within a few years could be good not to invest, as you never know what's going to happen to the stock market two months from now let alone 2 years.

    5. As for the rest, I transferred it in chunks (in order to not accidentaly hit a high or a low) into my brokerage accounts and bought stocks and bonds. The bulk of it, a good 50%, is in low index funds and other funds with the aim of generating an 8% return every year. 30% of it in a similar account but with lower risk, hoping for a 4% return. The remaining 20% are in pure stocks, with the highest risk but also the highest potential return.

    There are tons of ways to invest money, and not everyone is comfortable with stocks. Heck, you don't have to invest it at all. But for me, it made sense. It takes a little bit of maintencance but I'm the kind of weirdo who actually *enjoys* looking and the little blips of fluctuating stock prices so it kinda doesn't bother me.

    A nice added bonus of this is that my money earns me money. The high-yield savings account kinda just *almost* counters the inflation level where I live, but the investments do more than that. That is also why I can now quit my job and tell my not so great boss she can find someone else to pick on because this girl is, god and COVID willing, going travelling!

    Investing my money a little at a time made it easier for me to cross that scary first step into investing, and made me feel like I could pull out easily too should I find it too stressful for me.

    If you feel uneasy about it, start with a small sum and just watch what happens for a few months until you feel confident enough to invest more or confident in your decision that this is not right for you.

    I know this might not work for everyone. Personal finance is personal. I just wanted to share an example of what you can do. I felt so lonely going through this process and I hope this might help someone out there going through the same thing.

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