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Ask Dave

Lots Of Money And No Clear Plan

There are many ways to use an inheritance when you're renting ... but there's only one "best way".

QUESTION: Josh’s wife is about to get an inheritance, and they are renting now. They want to buy a home. Should they take the money and invest it or pay off the house? Dave walks him through how to handle the money.

ANSWER: I would pay off the house that I’m about to buy. If you’re out of debt and have an emergency fund of 3-6 months of expenses before you get the inheritance, then go to Baby Step 4 and set aside 15% of your income for retirement, then save for college for the kids with Baby Step 5. Then get to paying off the house.

It sounds like you’ll have everything in place by the time this inheritance comes. Pay cash for the house with this money. Then go back to Baby Step 4 and fully fund Roth IRAs and 401k plans and pay yourself a house payment each month into a mutual fund. That will turn into $1 million so fast it will scare you.