A reader says she and her husband never fought about debt, but they're fighting over an inheritance.

Question: Three years ago, we used Debt.com to help us settle our credit card problems. It took a couple years, but my husband and I are finally in the clear and even saving a few dollars a month.

Then last month, my step-mother died. It was traumatic but not a surprise, she was in her 90s. What I didn’t know is she had a significant amount of money that my father had left her when he died years earlier, and she never touched it. So I recently go a check for $29,000!

My husband and I are fighting over this, but not like you might expect. Neither of us want to blow it on a car or a vacation. The issue is: do we invest it in our retirement fund or create an emergency fund? We have neither of these things.

— Melanie in Kansas

Howard Dvorkin CPA answers…

I’m going to take the easy way out: Split the money and do both. However, don’t split the money evenly.

Before we get to the amounts, let’s talk about the basics…

Elsewhere in your letter, you said you and your husband are in your late 40s. If you have no significant retirement savings, you definitely need to start now. Your money will make the most interest there.

How much? I recommend you use the Traditional IRA Calculator built by my friends at Bankrate.com. You’ll notice the longer you invest, the higher the interest you’ll earn on your money.

Of course, saving for retirement won’t really help if you’re not prepared for an illness, accident, or natural disaster now. Sure, many retirement funds allow you to tap into them, or take out loans against them, for specific emergencies. Doing so takes time and paperwork, and during an emergency, you have little of the former and no patience for the latter.

That’s why I’d set aside $5,000 for an emergency fund. That’s not the standard “three to six months of living expenses” most financial experts recommend, but I’ve always had mixed emotions about that advice: Yes, that figure is the ideal, but for those who aren’t close to achieving it, such a high number can be discouraging. You might quit before trying.

After consulting with so many clients over the years, I’ve noticed $5,000 is seldom enough to cover the bills, but it at least buys you time to get your wits about you after an emergency hits. Then you can clearly figure out your next steps.

So with that said, I’d suggest putting $24,000 into a retirement account. There are so many kinds, with differing levels of risk, it’s difficult to advise you without further conversation and research. You and your husband should look into this together. Hopefully, it won’t result in another fight, but if it does, you know how to reach me!

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About the Author

Howard Dvorkin, CPA

Howard Dvorkin, CPA

I’m a certified public accountant who has authored two books on getting out of debt, Credit Hell and Power Up, and I am one of the personal finance experts for Debt.com. I have focused my professional endeavors in the consumer finance, technology, media and real estate industries creating not only Debt.com, but also Financial Apps and Start Fresh Today, among others. My personal finance advice has been included in countless articles, and has appeared in the New York Times, the Washington Post, Forbes and Entrepreneur as well as virtually every national and local newspaper in the country. Everyone should have a reason for living that’s bigger than themselves, and besides my family, mine is this: Teaching Americans how to live happily within their means. To me, money is not the root of all evil. Poor money management is. Money cannot buy happiness, but going into debt always buys misery. That’s why I launched Debt.com. I’m glad you’re here.

Published by Debt.com, LLC