Simple Approach to Get Rid of The Debt
You’re already in a good position financially with savings and investments that outweigh your debt. Here's a smart, simple approach to move forward and get rid of the debt while maintaining financial stability:
1. Understand Your Debt
- What’s the interest rate on the $20k debt?
- If it’s high-interest debt (like credit card debt, 15%+), paying it off ASAP is the best choice.
- If it’s low-interest debt (like a car loan or student loans, ~3-5%), you can weigh keeping the debt while allowing your investments to grow.
2. Use Your Savings Strategically
You have $33k in savings:
- Emergency Fund: Keep at least 3-6 months of living expenses in cash (e.g., $15k).
- Use a portion of the remaining $18k to pay down the debt. For example, paying $10k now would cut your debt in half while keeping a strong safety net.
3. Balance Investments and Debt
- If the interest on your debt is higher than the growth on your investments, withdrawing a small amount to eliminate the debt makes sense.
- If the debt is low-interest and your investments are growing at 7-10% annually, leaving your investments untouched and aggressively paying the debt monthly might be better.
4. A Plan Moving Forward
Pay off at least $10k of the debt now using savings.
Aggressively pay off the remaining $10k by redirecting part of your income, cutting expenses, or using savings.
Replenish savings over time to maintain your emergency fund.
5. Key Benefits of This Approach
- You become debt-free quickly without relying too heavily on your investments.
- Your emergency fund remains intact for peace of mind.
- You maintain most of your inheritance for future growth and security.