Handling an Inheritance Requires a Game Plan

While not always easy to think about, inheritances are a part of the financial picture for many baby boomers—and just one of the topics that popped up as I reached into my mailbox this past week.

Dear Mary: Before reading your book, Debt-Proof Living I believed we were doing just fine with our money. Recently, my husband’s father died and we received a small inheritance. We sat down to decide how to handle this money. I pulled out the book and showed my husband the chapter on the 10-10-80 formula and the information about the Freedom Account.

We sat there and figured out our expenses. We were shocked to discover we’ve been spending almost $1,800 more than we make each month. I guess we didn’t notice because we would take a
“little” out of savings to cover expenses as needed. At this rate, all of our inheritance would be gone in no time. Needless to say, I became rather depressed as we started reducing the outgo to balance our expenses with our income.

We are looking at every area of spending and already have found so many ways we could make the adjustments.

My husband actually thanked me this morning for all the work I’ve been doing on our budget. He always wondered why it seemed we were making good money, but never able to save any. Now we know. I am telling you all of this to say thank you! I know it will take work, but at least we are on the right track. I never would have figured this out if it hadn’t been for Debt-Proof Living. I’ll keep you posted on our progress. Kimberly

Dear Kimberly: Your letter reminded me of an interesting statistic I came across recently. Average time it takes a person to completely spend an inheritance: 17 months. Aren’t you glad you won’t be part of that statistic? Me too! Thanks for writing. Your letter made my day.

Dear Mary: My husband is an insulin-dependent diabetic. We have $78,000 in student loans and a $76,000 mortgage. If he dies before the student loan is paid, the outstanding balance is forgiven. We cannot get life insurance on him. So should we be working on paying off the mortgage before the student loans? Angie

Dear Angie: Under the circumstances it does make sense for you to concentrate on paying off the mortgage quickly while staying current with the student loan payments.

You don’t say if you are employed. If you are and the loss of your income would place your husband in financial hardship (which is, by the the way, should be the only reason for life insurance: to replace income for those who are dependent on it in the event of your demise) you need life insurance. If his diabetes is well-managed, there’s every possibility he will outlive you but his ability to earn enough to handle both debts could be greatly diminished.

Dear Mary: I am a 70-year-old single male with a decent income who faced the stark reality of bankruptcy. I have spent my entire life doing everything wrong when it comes to finances. While rearing my family we lived well, but a lot of it on stupid debt. I have never saved, seldom invested wisely, gave consistently―though at times very unwisely. My poor awareness of the proper way to handle money left an old man groping for a way out. With a debt load of over $36,000 on a fixed income, I entered a CCCS debt management program. Shortly after, I saw an ad for your book, Debt Proof Living. I bought it and have read and re-read it. I wish that I could have been exposed to this wisdom as a young man.

To know that “money is not to spend, but to manage” has changed my life. I will be debt-free in 44 months. I can’t begin to express to you my gratitude. Thank you for giving me hope. God bless, Billy

Dear Billy: You have no idea how much you have encouraged me. I am so proud of you. And you affirm what I so strongly believe, that there’s always hope and a way out. I think you’ll be debt-free sooner than you think. Thanks for reading my book. I am so happy to know that it was a catalyst of change in your life!

My only concern is what I will do with all the letters I get from 70-year-old single females who want your address.

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1 reply
  1. Luisa
    Luisa says:

    Today’s column was a helpful one. And I want to add my congratulations to Billy for his success. I was thinking today about how my parents didn’t really teach us kids money-handling skills, likely because no one really taught them. I have learned a lot as an adult, much of it from you, Mary. Thank you.

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