instead of paying down the loan>>>>>>>>
That just means you are bad at math. No wonder so many people are financially stuffed.
Feel better after today?
To anyone feeling better today, please don’t assume the market will resume it’s double digit annual appreciation. There will be good days and there will be bad days, but the Fed’s easy money policy will be winding down soon so the big bull run is running out of steam.
On the other hand, of course, I might be wrong.
“No one with loans at normal student rates should be considering investing (outside of 401K) until they are paid off, even mortgage holders at low interest rates with little equity should not risk money that would otherwise help pay that down.”
You really need to consider what the interest rate is. I still have a mortgage, smallish, that I could easily pay off but at 2 5/8%, I know I can do better investing that money over time.
"look for “Who’s driving the Mercedes.”
The reality is that many of the fancy car drivers are indulging in conspicuous consumption, those NOT saving as much as they could and those NOT living below their means.
You really need to consider what the interest rate is. I still have a mortgage, smallish, that I could easily pay off but at 2 5/8%, I know I can do better investing that money over time.<<<<<<<<<<
Note the caveat of little equity, a 25 yr old professional student won't have home equity and possibly doesn't even HAVE a mortgage, what she does have are student loans that are at least 6% unless they are from mum and dad.
Old people with equity have low rate mortgages, young people who are financially risky have higher rates. Horses for courses. A small windfall of 5K should be used to chip away at debt. That is pretty simple.
In the case of the person asking here, she does have a mortgage. But, I am responding to the comment I chose to quote in my post which included mortgages along with student loans in the advice. My own mortgage rate did not vary by age. Many young people can have strong credit scores as well. Mortgage rates are driven by credit risk not age. Young doesn’t always = risky, old doesn’t always = lower risk.
Don’t cherry pick just parts of my post please without looking at the context in which it was posted.
The point is one can’t make blanket comments that it is better to pay off debt without understanding context within a person’s entire financial context and the interest rates on that debt.
Look at your student loans. IIRC you are no longer taking new loans so you have a figure of all your current loans and the interest accruing and being paid. If you are comfortable with that number and paying it back over say 15 years, use the inheritance for other investing. If the loan is a little too big for your comfort zone, if you have a series of loans with some at 6%, some at 4%, then pay off a 6%er.
context<<<<<<
Context was higher than investment return rate debt, mortgage rates are historically low, context of thread LOL, is that this is the end of cheap money. If there is nothing else to take away from this current media hysteria is that interest rates are going up. Get rid of debt. Young people are going to be horrified by the oncoming increases in rates that they have grown up without even knowing about. I lived in a country where mortgage interest hit 15 percent when I was 24. When I moved to another country, the rate was 12%. This is a bit in the DNA of adults.
If interest rates are going up, and I don’t doubt they are, any fixed rate debt locked in already will look pretty cheap compared to debt that can be acquired in the years to come, correct?
All in all, I do think little to no debt is the best practice, however, to use the example of my own mortgage my 2 5/8% mortgage rate sure looks nice now and is likely to look even better when compared to rates a year or two from now.
A lot of us lived through higher interest rate environments, even while staying in this country.
I’m not entirely sure what I missed here and not sure if I’m the one being discussed but if so… student loans are in deferral because I’m a student, my mortgage is somewhere around 4%, and I have a HELOC line for ~4.25% with nothing pulled out yet.
I have over 6 months of savings in an interest savings account.
In the last month I’ve had my computer, phone, and fridge break and I was in a car accident (not at fault but I still had to run all over town because of BS with insurance). I am well aware things break 
I do have some debt on a new, no interest for 2 years credit card because why would I pay that off while it’s costing 0 and money in my savings makes money?
I will be getting a new (used) car soon. Probably a Subaru or Honda.
I’m very good with money- I just don’t know how to do things longterm with it because that’s never been an option in my life (or my parents since I was a thinking being).
A friend’s FA told them to keep their mortgage that they could easily pay off because it seems to correlate with less IRA audits (300K plus income so already in the higher risk for audit group). Dunno if that is a thing.
I don’t know how high US interest rates got? We moved from the 12% country to the US at 6% that same year. 6% is low. Even now that wouldn’t be high, right?
Whether an interest rate is “high” or not can’t be determined in a vacuum. What are investment vehicles paying? What is the rate of inflation? Are rates on an upward or downward trajectory?
Here’s a chart of historical mortgage rates in the USA since 1971. Look at the levels back in the late 70s/early 80s!
https://www.valuepenguin.com/mortgages/historical-mortgage-rates
If one has locked in a mortgage during a time period that is at a 50 year low, as many folks have in the past few years, rushing to pay it off isn’t always the “right” decision. Again, it will vary depending on factors unique to each person.
Really, take what I said out of context and tell me I am bad a math. Sorry but there are many situation where a person might be better off investing their small inheritance than paying off debt.
But not the one where the poster referred to has student loans, and a mortgage and is a professional student. That WAS the context.
.
That poster also has savings and an income as well. Some advice may be directed to the specific poster asking however 1) folks making statements that could be read a blanket advice should expect others pointing out that in many instances said advice isn’t the best advice and 2) no one here really can provide advice beyond the most basic advice (e.g. live below your means, save 6 months of living expenses for an emergency, the type of stuff found on that index card) because this forum doesn’t allow for the sharing of enough personal information - nor should it.
Look. A couple of things. Interest rates may or may not be going up. People have been “predicting” that and inflation for years. If rates do go up, they go up relatively slowly. A quarter point here, half a point there. We won’t hit 17% for quite some time. And if you do believe interest rates and inflation are going up, then locking in today’s low rates is the bomb. And with inflation you’ll be paying back with lower value dollars.
Are all your student loans subsidized, @romanigypsyeyes ? If not, pay off the ones accruing interest.
Having a 0% rate on a credit card or ‘90 days same as cash’ loan is not always the ‘best’ type of credit to leave sitting there. If there are no records of payments being made, it can be a ding on the credit history.
My first mortgage, on a condo, 1990?, was 16%. Yup. Nice condo, low association fees back then, good salary, no student loans, little consumer debt. Next month, the bottom dropped out of the CA housing market.
I think there are philosophical differences about where to put an extra 5k. Why put it into something maybe paying 2%, $100/year- (or maybe nothing, if speculative,) but remain paying other debt at higher rates? That’s the initial math. Student loans may get some tax credit. You’d need to calculate the net. But they’re amortized, so more of the early payments goes toward interst charges than principal. In deferral, interest grows.
If there’s no consumer debt (or at 0%,) fine. But you want to pay that off wehen the 0 expires. Will insurance cover the cost of a new used car?
For new investors, do not be in too much of a hurry before you learn about various types of investments.
Here are some web pages that describe various asset classes that one can invest in.
https://en.wikipedia.org/wiki/Asset_classes
http://monevator.com/asset-classes/
https://www.nerdwallet.com/blog/investing/investing-101-overview-major-asset-classes-invest/