Give yourself credit: Net worth update with inheritance

VolvoFor this month, our net worth is down 6 percent over last month. The culprits: A big payment toward the credit card I’m paying off, and the addition of a new student loan for Mr. Cheap’s graduate school. On the bright side: We still are up 6 percent over our position in March, when I started tracking.

Next month, our net worth will have an artificial increase when I cash in two matured savings bonds I inherited from my grandmother. Another bond matures in October. They won’t make me rich, but they’ll be a nice addition.

My grandmother passed away in July 2003. She left my sister and me several savings bonds purchased over our lifetimes. With the first bond, I re-invested a portion for Little Cheap. I used the rest to take a writing conference and enroll in a financial education course — plans in line with my grandmother’s values, as she also helped me fund a trip abroad when I was 16, some books for college and the purchase of my first car (a 1972 Volvo like that pictured above, only baby blue).

I plan to do two things with these bonds, using a “split the pot” philosophy. This is a scheme that allows us to taste the sweet gratification of a windfall, while also making some practical progress: You use a bit of a bonus to treat yourself, and then save or invest the rest. It seems like a wise strategy for those of us who want to become financially smarter — while still remaining a little hedonistic.

  1. On the splurge front, I hope to use part of the funds to buy bedroom furniture. Our current setup consists of two nightstands I like, purchased at Cost Plus about five years ago; a creaky, too-high bed whose headboard wiggles and squeaks and bangs the wall (even during such G-rated activities as sleeping and reading), given to us seven years ago by friends; a chest that was my father’s when he was a child; and a completely non-matching mahogany dresser bought for $75 with a matching nightstand from Mr. Cheap’s erstwhile co-worker. With our 12th anniversary coming up this fall, I believe some “real” furniture is in order — if I can find a satisfactory deal.
  2. I plan to use the rest of to jump start my emergency fund, since we are making good progress on the credit cards.

This second aspect goes against most financial planning advice, which would be to pay off higher interest debt (in this case 12.24 percent) before putting a windfall into a savings vehicle that earns less (in this case an ING Direct account that earns 4.50 percent).

My logic?

We’re making headway in paying off debt on our own, and I think it will mean more when I feel the pain. If I write a check to AmEx with Grandma’s legacy, I know I’ll feel a little sigh of disappointment in myself, because I didn’t earn it. In a couple months, I’ll pay that bill off anyway — with some sacrificing to make it happen. Then I can feel justifiably proud of myself.

Also, one of my stressors is my small emergency fund. The windfall will boost that fund and earn some interest. It will also give me peace of mind to steel me for my ongoing debt payoff.

To me, it’s a good plan. Now I just have to figure out how to cash in those bonds.

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