I Happened Across $15,000

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MapsMapsMaps
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I Happened Across $15,000

Postby MapsMapsMaps » Fri Dec 14, 2012 9:44 pm

So I received $15,000 in a will from a great aunt that I barely knew. What should I do with it? I am a 1L at T14. I have to take out $13,750 in loans each semester. Only fall has been dispersed at this point. But it already has ~$400 in interest after just a few months, for for a total of $14,150 ish at this point.

I have a few options, the way I see it.

1) Blow it on coke and hookers

2) Pay off my entire fall semester loans, thus reducing my principal for the next 3 years.

3) Keep it and pay for my summer expenses:
Im a veteran, so during the academic year I get a stipend sufficient to pay for my rent, food, and most spending money.

4) Pay off half of my fall semester loans and use the other half for the summer.

5) Any similar combination of loans, summer, etc

#2 seems most practical and seems to make the most sense accounting wise, but Im no expert and Im just looking for other perspectives.

Thanks for any advice.

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jkpolk
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Re: I Happened Across $15,000

Postby jkpolk » Fri Dec 14, 2012 9:50 pm

MapsMapsMaps wrote:So I received $15,000 in a will from a great aunt that I barely knew. What should I do with it? I am a 1L at T14. I have to take out $13,750 in loans each semester. Only fall has been dispersed at this point. But it already has ~$400 in interest after just a few months, for for a total of $14,150 ish at this point.

I have a few options, the way I see it.

1) Blow it on coke and hookers

2) Pay off my entire fall semester loans, thus reducing my principal for the next 3 years.

3) Keep it and pay for my summer expenses:
Im a veteran, so during the academic year I get a stipend sufficient to pay for my rent, food, and most spending money.

4) Pay off half of my fall semester loans and use the other half for the summer.

5) Any similar combination of loans, summer, etc

#2 seems most practical and seems to make the most sense accounting wise, but Im no expert and Im just looking for other perspectives.

Thanks for any advice.


I'm sure #2 is optimal. Alot of this is zero-sum- you have access to a huge pot of money (some loans and some cash from auntie) and you have a huge bill of costs that you have/will incur. No matter what you are still going to spend the same amount of money, unless this 15k windfall causes you to incur a bunch of new hooker/blow related costs. How you divvy it up isn't really important, so you may as well save yourself interest costs- and if you really want hookers and blow you can always just dip back into the big pot of money that is student loans.

Also: congratulations, dude!!! And...sorry about the aunt...

MapsMapsMaps
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Re: I Happened Across $15,000

Postby MapsMapsMaps » Fri Dec 14, 2012 9:54 pm

polkij333 wrote:
MapsMapsMaps wrote:So I received $15,000 in a will from a great aunt that I barely knew. What should I do with it? I am a 1L at T14. I have to take out $13,750 in loans each semester. Only fall has been dispersed at this point. But it already has ~$400 in interest after just a few months, for for a total of $14,150 ish at this point.

I have a few options, the way I see it.

1) Blow it on coke and hookers

2) Pay off my entire fall semester loans, thus reducing my principal for the next 3 years.

3) Keep it and pay for my summer expenses:
Im a veteran, so during the academic year I get a stipend sufficient to pay for my rent, food, and most spending money.

4) Pay off half of my fall semester loans and use the other half for the summer.

5) Any similar combination of loans, summer, etc

#2 seems most practical and seems to make the most sense accounting wise, but Im no expert and Im just looking for other perspectives.

Thanks for any advice.


I'm sure #2 is optimal. Alot of this is zero-sum- you have access to a huge pot of money (some loans and some cash from auntie) and you have a huge bill of costs that you have/will incur. No matter what you are still going to spend the same amount of money, unless this 15k windfall causes you to incur a bunch of new hooker/blow related costs. How you divvy it up isn't really important, so you may as well save yourself interest costs- and if you really want hookers and blow you can always just dip back into the big pot of money that is student loans.

Also: congratulations, dude!!! And...sorry about the aunt...

My thoughts exactly on the hookers and blow, the congratulations, and auntie, but especially on the "no matter what youre spending the same amount of money so may as well get rid of the compounding interest" concept.

Anything Im missing here?

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dingbat
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Re: I Happened Across $15,000

Postby dingbat » Fri Dec 14, 2012 9:57 pm

Do you have both Stafford and Plus loans?
At any rate don't take any new plus loans out next semester. If you have anything left thereafter, I'd pay down another Plus loan you have outstanding, rather than not take out the Stafford loan

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jgc02a
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Re: I Happened Across $15,000

Postby jgc02a » Fri Dec 14, 2012 9:58 pm

MapsMapsMaps wrote:So I received $15,000 in a will from a great aunt that I barely knew. What should I do with it? I am a 1L at T14. I have to take out $13,750 in loans each semester. Only fall has been dispersed at this point. But it already has ~$400 in interest after just a few months, for for a total of $14,150 ish at this point.

I have a few options, the way I see it.

1) Blow it on coke and hookers

2) Pay off my entire fall semester loans, thus reducing my principal for the next 3 years.

3) Keep it and pay for my summer expenses:
Im a veteran, so during the academic year I get a stipend sufficient to pay for my rent, food, and most spending money.

4) Pay off half of my fall semester loans and use the other half for the summer.

5) Any similar combination of loans, summer, etc

#2 seems most practical and seems to make the most sense accounting wise, but Im no expert and Im just looking for other perspectives.

Thanks for any advice.



i dunno, but i think you are looking at this the wrong way. why not look for ways in which to spend the money so that you can have a shot at making money? in other words, instead of blowing money on coke, buy $15k in coke, sell it for what? maybe half a mil? granted, it's a stupid example, but maybe try thinking outside the box a bit on the possibilities :) also, how is your credit? i.e. downpayment on a house? another example, what about vegas (roulette)? put 10k on a black or red, and you got a chance at turning the 10k into 20k, with 5k left over. take a look at this vid from guy who sold his house, his car, and everything he owned which was around $150k and bet it all on roulette!

http://www.youtube.com/watch?v=zGCdBsOIKYA

hope this helps you!
Last edited by jgc02a on Fri Dec 14, 2012 10:04 pm, edited 3 times in total.

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sopranorleone
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Re: I Happened Across $15,000

Postby sopranorleone » Fri Dec 14, 2012 9:59 pm

MapsMapsMaps wrote:
1) Blow it on coke and hookers


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Br3v
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Re: I Happened Across $15,000

Postby Br3v » Fri Dec 14, 2012 10:00 pm

Pay off fall semester, reduce principal.

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gaud
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Re: I Happened Across $15,000

Postby gaud » Fri Dec 14, 2012 10:01 pm

sopranorleone wrote:
MapsMapsMaps wrote:
1) Blow it on coke and hookers


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rinkrat19
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Re: I Happened Across $15,000

Postby rinkrat19 » Fri Dec 14, 2012 10:05 pm

With that amount, I personally would probably keep like $5k around to cover unexpected expenses or summer living costs, buy one smallish thing for myself so I got some small measure of fun and satisfaction out of it (like $200 or less), and pay down $10k on my loans.

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Nova
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Re: I Happened Across $15,000

Postby Nova » Fri Dec 14, 2012 10:07 pm

gaud wrote:
sopranorleone wrote:
MapsMapsMaps wrote:
1) Blow it on coke and hookers


MapsMapsMaps
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Re: I Happened Across $15,000

Postby MapsMapsMaps » Fri Dec 14, 2012 10:10 pm

dingbat wrote:Do you have both Stafford and Plus loans?
At any rate don't take any new plus loans out next semester. If you have anything left thereafter, I'd pay down another Plus loan you have outstanding, rather than not take out the Stafford loan

Yeah Stafford up to the max and then plus for like 3000 or whatever.

Good point, I'll ponder over it!

Nova wrote:
gaud wrote:
sopranorleone wrote:
MapsMapsMaps wrote:
1) Blow it on coke and hookers


I should save a 1-2000 to pay for the STD meds though.

MapsMapsMaps
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Re: I Happened Across $15,000

Postby MapsMapsMaps » Fri Dec 14, 2012 10:11 pm

rinkrat19 wrote: buy one smallish thing for myself so I got some small measure of fun and satisfaction out of it

I dont like fun. Fun is for losers.
Last edited by MapsMapsMaps on Fri Dec 14, 2012 10:11 pm, edited 1 time in total.

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Nova
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Re: I Happened Across $15,000

Postby Nova » Fri Dec 14, 2012 10:11 pm

MapsMapsMaps wrote:I should save a 1-2000 to pay for the STD meds though.


YOLO

MapsMapsMaps
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Re: I Happened Across $15,000

Postby MapsMapsMaps » Fri Dec 14, 2012 10:12 pm

Nova wrote:
MapsMapsMaps wrote:I should save a 1-2000 to pay for the STD meds though.


YOLO

Truth.

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bizzybone1313
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Re: I Happened Across $15,000

Postby bizzybone1313 » Fri Dec 14, 2012 10:19 pm

You forgot your best option: Invest that money in stocks and gain 50-75%. Europe is a good place to look at right now. Buy low and sell high. It won't be bad forever.

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dingbat
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Re: I Happened Across $15,000

Postby dingbat » Fri Dec 14, 2012 10:31 pm

bizzybone1313 wrote:You forgot your best option: Invest that money in stocks and gain 50-75%. Europe is a good place to look at right now. Buy low and sell high. It won't be bad forever.

Or you could use Benjamins for toilet paper

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2014
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Re: I Happened Across $15,000

Postby 2014 » Fri Dec 14, 2012 10:42 pm

Invest it conservatively and use it over the next 5 semesters to avoid taking out plus loans. The rates and fees are brutal. Paying down existing debt just causes you to continue to pay the govt that awful origination fee going forward.

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hung jury
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Re: I Happened Across $15,000

Postby hung jury » Fri Dec 14, 2012 10:48 pm

Invest it conservatively and use the dividends/interest to buy small amounts of crack cocaine and discount hookers.
Last edited by hung jury on Fri Dec 14, 2012 10:49 pm, edited 1 time in total.

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dannynoonan87
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Re: I Happened Across $15,000

Postby dannynoonan87 » Fri Dec 14, 2012 10:48 pm

1

I'm not kidding either

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dingbat
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Re: I Happened Across $15,000

Postby dingbat » Fri Dec 14, 2012 10:54 pm

2014 wrote:Invest it conservatively and use it over the next 5 semesters to avoid taking out plus loans. The rates and fees are brutal. Paying down existing debt just causes you to continue to pay the govt that awful origination fee going forward.

1 year's interest is more than the origination fee; best bet is to not take out the next plus, then use the excess to pay down existing plus loans

fluffythepenguin
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Re: I Happened Across $15,000

Postby fluffythepenguin » Fri Dec 14, 2012 11:02 pm

Whatever the highest interest rate loans you have (credit cards, then students loans, etc.), pay those off first. Then move on to the next highest interest rate loan. Rinse and repeat. Save any extra money left over.

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Nova
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Re: I Happened Across $15,000

Postby Nova » Fri Dec 14, 2012 11:10 pm

fluffythepenguin wrote:Whatever the highest interest rate loans you have (credit cards, then students loans, etc.), pay those off first. Then move on to the next highest interest rate loan. Rinse and repeat. Save any extra money left over.


Quality first post

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Veyron
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Re: I Happened Across $15,000

Postby Veyron » Fri Dec 14, 2012 11:15 pm

Although paying off stuff immediately may be tempting, I'd wait till I had an post-graduation offer in hand to do so. That way, if you don't get a 2L SA or you get no offered you still have a safety net. Also, not all firms give bar stipends so it behooves you to have some money set aside for living expenses while you study for the bar even if you do have a job lined up. If you have credit cards though you can pay those off and then use them for bar living expenses when the time comes.

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2014
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Re: I Happened Across $15,000

Postby 2014 » Fri Dec 14, 2012 11:37 pm

dingbat wrote:
2014 wrote:Invest it conservatively and use it over the next 5 semesters to avoid taking out plus loans. The rates and fees are brutal. Paying down existing debt just causes you to continue to pay the govt that awful origination fee going forward.

1 year's interest is more than the origination fee; best bet is to not take out the next plus, then use the excess to pay down existing plus loans

Interest is interest, if he isn't paying it on old loans he will be paying it on new loans. Unless future loans have better interest rates than past ones, I think the best decision is to avoid origination fees.

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thesealocust
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Re: I Happened Across $15,000

Postby thesealocust » Sat Dec 15, 2012 12:31 am

I would not recommend you pay your loans with this money.

Personal finance 101 says pay down loans with high interest rates, but it also says to keep an emergency fund. That's a pipe dream for most young workers, but all of the sudden it doesn't have to be for you.

I recommend you purchase $10,000 worth of Series I Savings Bonds. These are incredible (but geeky, and not sexy) products which don't get much press because there's a $10,000 limit per person per year, and don't have a great interest rate.

You can't redeem them for a while and have a minor interest penalty for I think 5 years, but they become fully liquid for at least the principal after I believe 3 months. So you'll have easily accessible funds that you won't be tempted to touch absent an emergency, and the interest rate they pay currently greatly exceeds all available savings account type products - and many bonds!

A one-time $10,000 bond purchase will give you an emergency fund to die for, and the return it earns will be much better than leaving it in a bank or something. If you run the math you could argue that the interest you're paying on debt you otherwise could have paid down is an "expense" for having an emergency fund - but series I savings bonds are really awesome, and IMO having at least some is worth the financing costs associated with a higher debt load.

[Danger: finance geeky stuff ahead]

The reason they're so great is because no other asset class matches their performance relative to market conditions. When interest rates go up, bond principal tanks - bonds are essentially only fully liquid so long as interest rates stay the same or decrease. But Series I give you full principal and accumulated interest whenever you liquidate them - so if interest rates jump to 10% tomorrow, you can just sell your I bonds and buy some 10% treasuries and laugh all the way to the bank. Or you can sit on your I bonds and watch their inflation indexed return jump up as well (in all likelihood).

Currently Series I Savings bonds give you the best of all worlds: a return tied to inflation (which should be somewhat tethered to inflation), principal protection (nothing is more principal protected than debt of the U.S. government), and liquidity (easy to sell online at treasury direct).




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