Skimm Money: Are you “hate spending” all your cash?

How the news affects your finances.

Cha-ching! Here’s What to Do with a Big Deposit

Have you recently come into some cash? Whether it’s from an eagerly anticipated tax refund (finally!) or an unexpected inheritance from a long-forgotten second uncle, you might be wondering “now what?”

Half of the nearly 70% of millennials and Gen Z who have or will receive an inheritance are expected to get more than $100K, according to one USA Today survey. This could make millennials poised to become the “richest generation in history.” Regardless of your current financial situation, it’s a good idea to have a game plan for this and any future windfall. Here are a few options from experts. 

Your Move:

• Pay down debt. Chipping away at higher-interest debt, like your credit cards and private student loans, is always a good place to start.

• Consider investing. Assess how much interest you’re paying on fixed-rate mortgages, car payments, or federal student loans, and compare that to the 6 to 7% average rate of return for the stock market’s S&P 500 — an economic benchmark that represents stock performance of the largest publicly traded companies in the US. Meaning, if the interest rate on your car is lower than that, you may be better off maintaining your car payments and investing that extra money instead.

• Treat yourself. Take the popular 50/30/20 savings strategy — 50% of your cash goes toward needs, 30% toward wants, and 20% toward debt and long-term savings — and apply that thinking to your deposit. If you scored a $3,000 tax refund), that means $900 could be used for a fun last-minute getaway.

• Consult a pro. Tap a financial advisor if you need some guidance. They can help develop a holistic plan for how the new $ fits into your overall financial road map. Tip: Look for a fiduciary vs. a broker, as these experts aren’t as incentivized to push commissioned products.

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Get answers straight from the finance pros.

We asked you to vote on a question you'd like answered. The winner was:

Should I max my retirement savings or put the money in my kid’s 529?

FEATURED EXPERT:

Abby Morton

Certified Financial Planner®, partner and planning director at Gather Financial® Planning

You know what they say: Put your oxygen mask on first before assisting others. The same could be said for retirement. “If you want to play things by the book, save completely for retirement before you even think about funding a 529,” says Abby Morton, certified financial planner and partner at Gather Financial Planning in Bangor, ME.

That said, Morton gets the desire to save your kid from the weight of student loans. “I think most parents would say, ‘if I have to work a year or two longer to make sure that my kids are successful and get the education they need, I’ll do that,’ she says. If that speaks to you, aim for the 80/20 rule, says Morton.  “If you have $10,000 to save, put $8,000 towards retirement and $2,000 toward college savings” she says. “That way, you’ll be able to breathe a little easier about having something put away for college without sacrificing your retirement.”

One act of financial self-care you can do in five minutes.

Car insurance too high? Bigger deductible = lower premium

Car insurance premiums are up more than 22% from last year, averaging about $167 a month. One easy way to lower your premium: Call your insurance company, and ask to raise your deductible. (Yes, this means you’ll have to pay more if you file a claim, so consider doing this only if you’ve already built an emergency fund.) Lowering your monthly bill means more money in your pocket today for that summer road trip.