Making the Most of $10K When in Debt

Q. We have a 40 year old son, who has nothing saved for retirerment, no 401(k), etc. He owes $60,000 on his house which is about what it is worth (merged car loan). He will soon receive $10,000. What should he do with the money? He's receiving child support from his wife, $450. His new wife does not work, his income is around $45,000. A concerned mother, thanks.

A. The difficulty may be that there needs to be a change in behavior. There's nothing magic about building wealth. You have to live below your means and be disciplined to save. Only your son will be able to make that change and, depending on his personality, outside pressure may result in him resisting change.

In your son's situation it may be that he doesn't have enough income. If his home is only worth $60k, then he is already living modestly. $45k in income doesn't go a long ways nowadays, especially with children.

As far as what he should do with the $10k, I would recommend that he put it toward the debt on the home. If monthly cash flow is a problem, he can then refinance the $50k left on the home for 30 years. That would lower his monthly payment without adding to his debt.

Thanks for your question!

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