Handling an inheritance requires a good game plan


While not always easy to think about, an inheritance is a part of the financial picture for many baby boomers. That was just one of the topics that popped up in my inbox this past week.

Dear Mary: Before reading your book “Debt-Proof Living,” I believed we were doing just fine with our money. Recently, my husband’s father died and we received a small inheritance. We sat down to decide how to handle this money. I pulled out the book and showed my husband the chapter on the 10-10-80 formula and the information about the Freedom Account.

We figured out our expenses. We were shocked to discover we’ve been spending almost $1,800 more than we make each month. I guess we didn’t notice because we would take a little out of savings to cover expenses as needed. At this rate, all of our inheritance would be gone in no time. Needless to say, I became rather depressed as we started reducing the outgo to balance our expenses with our income. We are looking at every area of spending and have already found so many ways we could make the adjustments.

My husband actually thanked me this morning for all the work I’ve been doing on our budget. He always wondered why it seemed we were making good money but never able to save any. Now we know. I am telling you all of this to say thank you! I know it will take work, but at least we are on the right track. I never would have figured this out if it hadn’t been for “Debt-Proof Living.” I’ll keep you posted on our progress. — Kimberly

Dear Kimberly: Your letter reminded me of an interesting statistic I came across recently, which said that it takes an average of 17 months’ time for a person to completely spend an inheritance. Aren’t you glad you won’t be part of that statistic? So am I! Thanks for writing. Your letter made my day.

Dear Mary: My husband is an insulin-dependent diabetic. We have $78,000 in student loans and a $76,000 mortgage. If he dies before the student loans are paid, the outstanding balance will be forgiven. We cannot get life insurance on him. Should we work on paying off the mortgage before the student loans? — Angie

Dear Angie: Under the circumstances, it does make sense for you to concentrate on paying off the mortgage quickly while staying current with the student loan payments.

You didn’t say whether you are employed. If you are and the loss of your income would place your husband in financial hardship (which is, by the way, the only reason for life insurance — to replace income for those who are dependent on it in the event of your demise), you need life insurance. If his diabetes is well-managed, there’s every possibility he will outlive you, but his ability to earn enough to handle both debts could be greatly diminished.

Dear Mary: I am a 70-year-old single male with a decent income who faced the stark reality of bankruptcy. I have spent my entire life doing everything wrong when it comes to finances. While rearing my family, we lived well but incurred a lot of stupid debt. I have never saved; I have seldom invested wisely; and I have given consistently, though at times very unwisely. My poor awareness of the proper way to handle money left me as an old man groping for a way out. With a debt load of over $36,000 on a fixed income, I entered a consumer credit counseling services debt-management program. Shortly after, I saw an ad for your book “Debt Proof Living.” I bought it and have read and reread it. I wish that I could have been exposed to this wisdom as a young man.

To know that “money is not to spend, but to manage” has changed my life. I will be debt-free in 44 months. I can’t begin to express to you my gratitude. Thank you for giving me hope. — Billy

Dear Billy: You have no idea how much you have encouraged me. I am so proud of you. And you affirm what I so strongly believe, that there’s always hope and a way out. I think you’ll be debt-free sooner than you think. Thanks for reading my book. I am so happy to know that it was a catalyst of change in your life! My only concern is what I will do with all the letters I get from 70-year-old single women who want your address.


It was an honor to be invited to spend a few days on the campus of Indiana Wesleyan University to speak to the students on money matters, specifically, the loans many of them will take away as part of their college experience.

Remember the days when to get a loan you had to qualify and prove you had the capacity to repay the debt? Well, for college students, those days are history. They do not need to have a job or a cosigner to get huge amounts of money in federal student loans. From what I discovered on my visit, students (and in many cases, their parents) are more than willing to accept as much as they can get in federal student loans because these days that’s just the normal way to pay for college.

But here’s the good news: These young adults are willing to listen to advice from someone who’s been around the block with debt. Seizing the moment, here is what I told them:

Accept the least amount of help possible, not the most available help. Just because you can borrow enough money each semester to pay for tuition, room and board and books doesn’t mean you should. You’ll never believe how difficult it is to pay back. Check yourself out of governmental outpatient care. Get a job. And get two or three in the summer. Finish your degree as soon as possible instead of taking it slow and easy. Make your own way as soon as possible and you’ll reap the benefits for the rest of your life.

Understand what entry-level means. There’s a pervasive attitude among college students that really great jobs await those with degrees. Yes, your lifetime earnings will surpass what your peers without degrees can expect to earn but not in the beginning. You must plan to start at the bottom. This is called the entry level. There are no really great-paying jobs at the entry level. Teachers, attorneys, doctors, stockbrokers — all professions require entry at the bottom. That means the lowest pay. If you think you had to scrape and scrimp in college, consider that a rehearsal for the real world. Do not fantasize about making the big bucks from the get-go.

‘Tis easier to borrow than to repay. For every dollar you borrow to pay for college, the typical repayment plan will require that you pay back at least two dollars. You can reject that plan if you work twice as hard in your first three years out of school — even harder than you worked in college. Double up on your payments. Work as many jobs as possible. Delay starting a family if possible. Don’t buy a new car or dive headlong into a big house payment. Concentrate on wiping out your student debts as quickly as possible. That’s a gift you can give yourself that you will never regret.

Enjoy these years in college. Even with all the pressure of paying for your education while keeping up your good grades, make sure you learn all you can, do all you can and pay all you can now. That’s the way to make these the best years of your life.

EDITOR’S NOTE: Mary Hunt is the founder of www.DebtProofLiving. com and author of 18 books, including her latest, “Can I Pay My Credit Card Bill With a Credit Card?” You can email her at mary@everydaycheapskate. com.