What do do with small inheritance (50K)

[fishsticks2629]

Recently I was given a small inheritance ($50,000) by one of my lovely late family members. I just started a surgical residency that will last for 8-9 years (including research and fellowship). I have $360,000 in student loan debt with almost all of it being in various federal loans. I signed up for REPAYE option. I do not own a home and am renting. I live in Los Angeles.

I put the amount into a savings account with a 0.03% interest rate. Any advice if I should do anything else with the funds? Should I buy a house?

Advice is greatly appreciated.
Thank you!

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[thesauce]

You guys should get together: http://forums.studentdoctor.net/threads/making-50k-on-house-where-to-put-money.1195926/

 

[doc05]

Should I buy a house?

Advice is greatly appreciated.
Thank you!

do not buy a house. prices are too expensive in LA and being a homeowner as a busy surgical resident isn't a good move.

 

[fishsticks2629]

You guys should get together: http://forums.studentdoctor.net/threads/making-50k-on-house-where-to-put-money.1195926/

Haha yea. I read his post before I posted mine. A total coincidence. lol

 

[ThoracicGuy]

Recently I was given a small inheritance ($50,000) by one of my lovely late family members. I just started a surgical residency that will last for 8-9 years (including research and fellowship). I have $360,000 in student loan debt with almost all of it being in various federal loans. I signed up for REPAYE option. I do not own a home and am renting. I live in Los Angeles.

I put the amount into a savings account with a 0.03% interest rate. Any advice if I should do anything else with the funds? Should I buy a house?

Advice is greatly appreciated.
Thank you!

Consider it a good emergency fund. Put it in a higher interest bearing savings account. Use it to fund your IRA contributions each year.

 

[hatfielj]

I agree with thoracic guy. Save it as a liquid-able asset. That will prevent you from needing to go into debt for anything. You will be very glad to have it when you're out of residency, paying off debt, and looking for a house, etc.
Do NOT buy a house. Houses are a pain in the ass and very expensive.
And you should be able to find a better interest bearing account than that. I have a checking account through my credit union that has 1.75% interest.
You're very fortunate to have that. Protect it!

 

[RangerBob]

8-9 years is a long residency/fellowship! If you weren't a surgery resident then it probably actually would've been worthwhile to look into buying a home, as a CA home is likely to go up a fair amount in value during that time. But as a surgery resident you just won't have time to improve/maintain the home on your own, so that will just add more stress you don't need. Keep life as simple as possible. I own a home, but I'm a PM&R resident who has a bit more time and one of my hobbies is landscaping and light construction. (I also live where we could buy a home for just over $100k0--that gets you a dog house in the SF Bay Area where I grew up, and maybe it gets you a 2-story dog house in LA...

I agree with the others that you should use some of it as your emergency fund. If your program offers a 401k with a match you should max that out every year prior to funding IRA's, but you can do both. I'd pay just the minimum REPAYE on your loans in the event PSLF sticks around--you've only got one more year left after you finish residency (assuming PSLF sticks around--but we should know that in 1-2 years max). REPAYE was definitely the right way to go--that interest subsidy will save you a ton of money.

My wife and I had a similar scenario last year--we inherited $20k. I used $15k to repay my dad who had taken out a home equity line of credit to pay off two of my private undergrad loans (they entered repayment in medical school and he wanted to help me out). I used the other $5k to add to our emergency fund.

 

[FrugalMuscle]

Figure out which one of your loans has the highest interest rate. Pay that one first. Any and all interest should be seen as a GUARANTEED negative return. If you dont want to do that then consider tossing some in a roth IRA. If you want to keep it liquid then open up an account at Ally Bank that pays 1% interest and is FDIC insured.