What Would You Do? #3

Dec 7, 2012 by

dice with question marksEach What Would You Do? article outlines a scenario with a dilemma and choice to be made by a person I’ve made up, either Dave or Diane (any resemblance to you or me is purely coincidental!). Most of the time, money won’t be the only factor involved in the choice, but money will play a meaningful part in Dave’s or Diane’s options. Also, most of the time, there won’t be a “right” answer (this is NOT a test!). I’m hoping to get at what should Dave or Diane consider in making the choice? What’s a good way to go about making the choice? Of course the best way for you to explain your ideas may be to outline what you would do in the same scenario and, most importantly, why.

Dave’s $25,000 Windfall

Uncle Morty—Dave’s favorite Uncle—passed away last month after a long and adventurous life. Uncle Morty must have felt a strong connection to his lone nephew because, to Dave’s surprise, Uncle Morty specified in his will that Dave should get $25,000 from his estate.

Dave’s Options for $25,000 Cash

Like most middle class people, Dave and his wife have many potential uses for the unexpected but very welcome windfall from Uncle Morty. Dave wonders what Uncle Morty would want him to do with it. Something practical, like re-roof the house? Something indulgent, like take a trip to New Zealand? A mix of the practical and indulgent? Dave’s mind races with the possibilities. He’s come up with a list of options to talk over with his wife:

  1. In fact, Dave has always wanted to go to New Zealand, especially since watching the Lord of the Rings movies. He figures he and his wife could take a very nice 2-week trip for about $10,000.
  2. Though Dave and his wife max out contributions to their workplaces’ 401(k) retirement plans, the extra cash flow to also fund an IRA hasn’t been there, given the family’s tight budget. Uncle Morty’s $25,000 would allow them each to make $5,000 IRA contributions for 2012 and $5,500 each for 2013, with $4,000 left over.
  3. Dave’s kitchen, including all the appliances, is about twenty years old. He and his wife started a Planned Savings fund to pay for a remodel, but so far have managed to sock away only $700. Uncle Morty’s bequest would make a big dent in the kitchen upgrade kitty.
  4. The family’s emergency fund totals $10,000. That’s not bad, but Dave and his wife would be less anxious if the fund were more like $25,000.
  5. Dave and his wife recently got a request from Dave’s sister-in-law for a $10,000 loan. The sister-in-law and her husband are hardworking, blue collar folks who, like many, have suffered job losses since the 2008 financial meltdown. Though both are employed again, they’ve lost ground with respect to income, and they’re behind on their house and car payments and are at risk of losing both if they can’t catch up soon.
  6. Let’s call this Dave’s family’s “wish list”—stuff for which they likely would never justify making room in their normal budget (but Uncle Morty just might have wished they’d spend his money like this!):
    • New sets of excellent golf clubs for Dave and his wife
    • An Alaskan cruise
    • A week long, show-filled trip to Las Vegas
    • A Mazda Miata, for fun
    • A backyard deck, grill, and hot tub

What Would You Do?

If you were Dave, what would you be in favor of doing with the $25,000? You don’t need to choose from the few options listed above; feel free to get creative and propose your own ideas.

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  • John S @ Frugal Rules

    Interesting dilemma. I would that if his uncle left him this money then he more than likely had some ideas in mind for how he’d use it, especially if he knew of the tight budget. I would tend to say that it would be a mix of practical and saving/investing with a little bit of fun as well. I would not take the trip to New Zealand, but there’s nothing wrong with taking a simpler family vacation. That should not cost more than a couple of thousand dollars. I would probably throw the rest at savings/investing unless they desperately need something for the house. If they did, then I would split it between the two.

    • http://mymoneycounselor.com/ Kurt Fischer

      Sounds very sensible John S…

  • Angelo_Frank

    “A Mazda Miata, for fun” I’m already doing that!
    Dave, and his wife, need to make a priority list of five items and put $5k toward each one.

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