Dec 7, 2024
Deciding how to allocate an inheritance can be a tough call to make. Only 42% of American adults who expect an inheritance feel very comfortable financially handling the windfall, according to a survey by New York Life Wealth Watch.
On a recent episode of The Ramsey Show, one caller shared her discomfort with how her husband handled his.
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Annie, a 46-year-old from Boston, Massachusetts, told Ramsey Show hosts her and her husband were struggling to get on the same page about his recent $140,000 inheritance.
While she wanted to use the cash to pay down their mortgage, her husband “put his foot down” and decided to invest the money instead. She conceded the argument because “technically the inheritance was to him,” however, she can’t get over her feelings of resentment over his decision.
Digging into the numbers, co-host Jade Warshaw offered a diagnosis: “Financially speaking, nothing is broken because this decision was made,” but there is a relationship issue that needs to be resolved.
Here’s why how we feel about money can be just as important as how we spend it.
Is there a real financial issue?
In terms of finances, Annie and her husband are in great shape. Her retirement account is worth $250,000 while his is worth $450,000. The couple is on Baby Step 6 of Ramsey’s debt reduction program and has paid down a lot of debt.
Add to that the recent influx of $140,000 that lives in a separate investment fund under both of their names, and the remaining $300,000 mortgage pales in comparison to their net worth.
For context, the median net worth for an American in their 40s and 50s is $124,509 and $287,482 respectively, according to Empower. In fact, 20% of Americans over the age of 50 have zero retirement savings whatsoever, according to an AARP survey.
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Co-host Ken Coleman believes the couple is set for a comfortable retirement, regardless of whether they pay off the mortgage now or later. Instead, he suggests Annie take a fresh perspective to identify the real problem.
“This is a relationship issue, not a money issue,” he told Annie.
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No wrong answers
Given their robust financial position, Warshaw and Coleman agree that there are “no wrong answers” when it comes to deciding what to do with the inheritance. Neither investing the money nor paying off the mortgage will set them back.
However, the problem is that Annie didn’t communicate her side of the story enough, which is leaving room for resentment. But it’s easier said than done, as 62% of Americans don’t discuss their finances, while 46% don’t even talk about money with their spouses, according to Empower.
The good news is that this problem has an easy solution: more dialogue. According to an Edelman Financial Engines report, 38% of couples surveyed said they wish they discussed finances with their partners more, and 83% believe doing so can help resolve disagreements in their relationship.
Coleman prescribes a “chill conversation” with her husband to express the anxiety she feels with the mortgage looming over their heads and come to a mutual understanding about what to do next. If this conversation is difficult, he suggests reaching out to a third party for help.
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Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
