Smart Money Podcast: Are CDs Worth It, and Managing a Life-Changing Windfall

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.

This week’s episode starts with a discussion about certificates of deposit, or CDs.

Then we pivot to this week’s money question from Max, who asked about the best use of a big windfall of money. He wrote, “I'm currently going through a divorce (it's OK, it's for the best) and I will be getting approximately $100k from it. I'm moving into my own apartment and have no debt except for less than $10k of credit card debt and my student loans. I currently make around $130k per year at an extremely stable job.

My question is this: With the housing market heading towards a correction should I hold on to this money and wait to buy a house at as ideal of time as possible or pay off my debt?

A slight caveat to this, I owe approximately $150k in student loans. My thoughts are to use it for the student loan debt because once that debt is gone my life is changed forever for the better, but I could miss an opportunity to buy a home at a reasonable price.”

Check out this episode on any of these platforms:

• Apple Podcasts

• Spotify

Our take on CDs

Putting money into a certificate of deposit, or CD, has plenty of appeal when you can regularly find annual percentage yields from 4% to 5%, which is the case in early 2023. But high-interest savings accounts are also boasting APYs north of 4%, so which savings vehicle should you choose if the interest rates are the same?

A CD guarantees a fixed interest rate, usually higher than those offered by regular savings accounts, over a set period of time. CDs often impose a penalty if you withdraw money before the term is up, so they’re probably not the best place to store money that you need in the near future. But if you know you won’t need the money for a while and don’t want to be tempted to spend it, a CD is a safe option. For those who want easy access to their cash, a high-yield savings account probably fits the bill.

Our take on the best uses of a money windfall

Coming into a life-changing sum of money can feel overwhelming, not least because of the many decisions that must be made about that money. Let your values and money goals drive your choices. While there will be plenty of variation among individuals, financial planners generally list saving for retirement, building an emergency fund and paying off high-interest debt as top priorities. Some people may be tempted to use a big influx of cash to pay off a house or student loan debt. Note, though, that interest on a mortgage and student loan can be tax-deductible, and if the interest rate on those debts is low, you may profit more by investing money in the stock market, which has produced average returns of about 10% per year for nearly the past century, as measured by the S&P 500.

Our tips

1. Weigh your options: When you get a windfall, think about how to use it to make progress on the financial goals that matter most to you. You might be able to do multiple things at once.

2. Think about returns: Paying off student debt can lift a psychological — and financial — burden, but you could see better financial returns by investing for your retirement.

3. Consider a splurge. You could use 10% of any windfall to buy or do something fun.

More about money windfalls on NerdWallet:

Where’d the Money Go? How to Handle a Windfall

How to Set Financial Goals

Should You Pay Off Student Loans or Invest?

Have a money question? Text or call us at 901-730-6373. Or you can email us at [email protected]. To hear previous episodes, go to the podcast homepage.

Episode transcript

Sean Pyles: Hey, Sara, what would you do if you found yourself suddenly single with $100,000 to spend?

Sara Rathner: I probably have a couple of follow-up questions like, "Was my husband abducted by aliens in exchange for the money?"

Sean Pyles: Well, OK, that's not exactly the situation that one of our listeners found themselves in, but we'll get into that more later on. In this episode, Smart Money host Liz Weston and I talk with a listener to help them figure out what to do with this enormous opportunity. Welcome to the NerdWallet Smart Money podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Pyles.

Sara Rathner: And I'm Sara Rathner. Do you have a money question for the Nerds, maybe about how you can spend $100,000 and get a fresh start? Call or text us on the Nerd hotline at 901-730-6373. That's 901-730-NERD, or you can email us at [email protected].

Sean Pyles: Before we get into the conversation with our listener, Sara and I are going to talk about certificates of deposit.

Sara Rathner: Woo.

Sean Pyles: And whether they're as good a deal right now as they might seem.

Sara Rathner: Fun. I mean, not fun, but it could be a place to park some of that $100,000 you got in exchange for an alien abduction. So let's talk about it.

Sean Pyles: Well, Sara, some people may not know what certificates of deposit, often called CDs, are. Can you give us a quick explainer, please?

Sara Rathner: Yes. So CDs are a banking product where you lock up a sum of money in an account for a set amount of time and you get a guaranteed rate of return, and typically, CDs will have a minimum deposit amount and you'll also agree to a certain time frame, and there's a penalty for withdrawing your money before the term is up.

Sean Pyles: Right now, some of the best CDs are offering annual percentage yields or returns of around 4% to 5% with a term of about a year. And that's why this is appealing is because there is the promise of a guaranteed return. Given how wobbly the stock market has been over the past year, CDs can feel like a safe way to earn some money from your money.

Sara Rathner: Right. And for money that you don't necessarily need today but you might want to have access to in the relative short term. This could be a place to park the money until then, but they're not the only high-yield product in town. High-yield savings accounts, we're huge fans of those because they're also offering APYs of around 3.5% to 4%, which is quite high compared to how it was even a year ago. And you don't face a penalty for withdrawing money from your savings accounts, and so you have a little bit more flexibility and access to your cash compared to what you would be dealing with, with a CD. Now, typically, yields on these types of accounts rise and fall whenever the Federal Reserve raises or lowers interest rates, which seems likely to continue this year. So we might see APYs on high-yield savings accounts and new CDs, not existing ones, go up this year.

Sean Pyles: Right. And in contrast, your CD rate is locked in. So if you put money into a CD a year ago that had a yield of 3%, you're getting less money from that than you could if that money was in a good high-yield savings account right now.

Sara Rathner: Yes. So that's a tiny risk you run is locking in a rate and then the rate goes up later on and you can't change it. Although I think there are some CDs that allow that, but you'd have to find products. That might be a little too complicated.

Sean Pyles: Right. Your rate is locked in, and your money is locked up.

Sara Rathner: So you want to be sure, especially if you're putting a very large sum of money into a CD, that you are comfortable with the rate and you're comfortable with the amount of time.

Sean Pyles: Yeah. Well, given how similar the yields are on CDs and high-yield savings accounts right now, you might be wondering why anyone would bother locking up their money for an additional maybe 1% in interest right now, especially when that interest rate might actually be lower than what a high-yield savings account might be offering a year from now. Well, that's my question at least, and to answer my own question, I do think there's a benefit to locking up some money for a set amount of time. This can be especially true if you get a windfall of a pretty significant amount of money and you just don't know what to do with it and are worried that you might blow it all. You could maybe put that money into a CD for a year while you sort out what you want to do with this cash.

Sara Rathner: Yeah. And that guarantee of a set rate that's not going to change can give you a lot of peace of mind. You don't have to think about chasing returns, moving from one account to another just to get an extra half a percent. You get what you sign up for. And for many people, that's enough. If you're putting a small amount of money into a CD, you might not notice much of a difference in what you get in return for a 1% or 2% difference. But if you put a lot of money, like some five-figure sum into a CD, then that can really add up. So it could also depend on how much money you're willing to set aside, too. And if you think or know that you're going to need to tap into that money in the next year or so, you're going to get more flexibility out of a high-yield savings account without penalties for withdrawals. So think about whether or not you are pretty certain that you can leave that money alone for a while.

Sean Pyles: Yeah. Well, Sara, have you ever used a CD?

Sara Rathner: I have. Back in the glory days of the mid-aughts when CDs paid around 5% APY, I did use them as a way to earn a pretty decent return over a pretty short period of time on some savings I knew that I could leave alone. What about you?

Sean Pyles: The only CDs that I use are in my CD collection in my car, womp, womp. But to be honest …

Sara Rathner: You still have a car with a CD player?

Sean Pyles: I do. It's a 2016, and I love my CD player. It's great for road trips. But when it comes to certificates of deposit, I've never used one. I almost did just this month, but then notes from the recent Federal Reserve meeting came out and it seems like they're about to raise rates again, so I figured my money is probably better off in an account where the yield can continue to rise and I can continue to have access to it.

Sara Rathner: All right, listeners, if you have any questions about CDs or high-yield savings accounts, let us know. Leave us a voicemail or text us on the Nerd hotline at 901-730-6373. That's 901-730-NERD. You can also email us at [email protected].

Sean Pyles: All righty. Well, now let's get on to this episode's money question segment. For this episode's money question segment, we are joined by Max, a listener who wrote us with a few questions about starting a new chapter of his life and the best way to use a big financial windfall after a divorce. We're going to talk with Max about his situation and answer some of his questions so he can make his financial decisions with confidence. Welcome to Smart Money, Max.

Max: Hey, how you guys doing?

Sean Pyles: Doing great. It's great to have you on. Max, to start, can you lay out your current circumstances where you are personally and financially right now?

Max: Yeah, no problem. Thanks for having me, and I'm excited to be here and get some knowledge from the experts, so to speak, but I recently went through a divorce. As sad as it is, it's necessary. It's better for both of us and just want to get my life moving in the right direction. And because of that, we decided it was best for her to keep the house. We've fortunately bought it a while ago and had some equity, so I'm going to be receiving a six-figure chunk of change from various other debts and vehicles and the house equity and stuff like that. So I don't know what to do with it.

Liz Weston: OK.

Sean Pyles: One thing that comes to mind immediately is whether there are any tax implications on getting this money. Have you been told about anything like that?

Max: Yeah, I've been asking that same question. I have a meeting with a CPA coming up. From the research I've done, divorce income quote, unquote is a little bit different. It's not taxed the same way. And equity of a house I think is different if it's your primary residence. So I'm not too worried about it, but I'm definitely going to talk to an accountant about it.

Liz Weston: So where are you in terms of debt and retirement savings? What kind of things are you thinking about using this money for?

Max: The primary goal that I had for the money is student loan payment, and my ex-wife and I had substantial amount of student debt between the both of us. We both had our master's degrees, so it's pretty substantial. I've got about $150,000 in student loan debt, and this amount would be able to take a large chunk of that out.

Liz Weston: Yeah, yeah, it would. And then how about retirement savings or other debt?

Max: I currently have a 401(k) through my place of employment.

Liz Weston: How much are you putting into the retirement right now?

Max: I put in roughly 10%.

Liz Weston: Great. OK. And you get a company match, obviously?

Max: Correct. Yeah. And no other debt except for I think about $2,000 in credit card debt, but that's getting paid off the next paycheck. So really the only substantial debt that I have in my life is my student loans.

Sean Pyles: Have you been making payments on that throughout or are they also on pause right now?

Max: Oh, no. I've been making payments on them since I've been out of school. I was fortunate not to lose my job during the pandemic, like most of the other world, so I'm very blessed for that. But I've been making the payments continual.

Liz Weston: Are these federal student loans or private student loans?

Max: They were refinanced to private.

Liz Weston: Oh, OK.

Max: Yeah, that's the other trick.

Liz Weston: Oh, ouch.

Max: Yeah. Yeah.

Liz Weston: That must have been really painful to see everybody else get a pause on their student loan payments and there you are plugging away.

Max: It's definitely probably the biggest regret I've had from leaving the federal government's debt, that's for sure. I wish I would've been better at predicting a global pandemic.

Liz Weston: Yeah, you and me both, brother.

Sean Pyles: So I have a question around the interest rate on your debts. Are you aware of what those are?

Max: Yeah, so that's actually one of the big driving reasons I had for refinancing. Before I took it private, I had nine different loans from two different providers at various interest rates from 6% to 8.5%. And after refinancing to go private, I went to one student loan with one payment a month at just shy of 5%.

Sean Pyles: OK. So that's an improvement. And so one thing you're considering is throwing the roughly $100,000 that you're going to be getting from the divorce at your $150,000 of student loans, but that's not the only thing you're thinking about doing. I know you're also considering maybe buying a car, is that right?

Max: Yeah, and I have a work vehicle. I've borrowed my parents' vehicle for a little while now, and I just need a vehicle of my own. We drive on the West Coast, and it's a commuter town.

Sean Pyles: What are you looking for in a car?

Max: I bounce back and forth. I think to myself, "Man, I can get a bucket and just ride that until all my debts paid off or … "

Sean Pyles: Yeah.

Max: I'd rather get something that I know I'm going to keep for the long haul. I've thought a lot about EVs and so on and so forth, but who knows?

Sean Pyles: Yeah, it's tough right now for car buyers. I've been considering getting a car myself, and I'm in a position where I have a used car that I would potentially trade in for a new car, and that is perhaps the worst position to be in, in this current moment.

Liz Weston: Yeah.

Sean Pyles: Used car prices are dropping, but new car prices, they actually hit another record high in December of 2022. The average new vehicle sold for around $49,500, which is an enormous amount of money. So you might be able to get a new car that would last you several years, but then again, you'll have a new line of debt that you'll be paying monthly. And so that's something else to consider, too.

Max: Yeah, exactly. The way you put it, Sean, is can we just get scooters?

Sean Pyles: I mean, depends on where you're living and what you need to haul around in a vehicle or not.

Max: That's true.

Liz Weston: And those of us who are into hybrids, the tax credits dramatically changed, and now you need a car that's basically assembled in the U.S., so it's going to take a while for the various carmakers to move more of their production to the U.S. to take advantage of this. You want to wait as long as possible to have the most choice, but sometimes you just can't wait. Sometimes you just got to buy that car.

Sean Pyles: But there's also another priority you are considering as well, which is maybe buying a house. So that's the third thing that you're considering maybe spending this money on. How are you thinking about buying a house right now?

Max: Yeah, that's the other part that I would think has probably taken a back burner in my overall planning. I've been where I'm currently located for the majority of my life, so I am thinking about moving out of state, but holding onto that money for another year or two could allow me to be able to make that move comfortably, but also hopefully quote, unquote time the market better if that exists.

Sean Pyles: Well, maybe not. In terms of timing the housing market, we like to talk about the best time to buy is when you're ready to do so, meaning that you have the money, your credit score is in good shape, and you're emotionally and personally ready for the commitment and the work. And part of that means that you're likely going to stay in that house for around five years to recoup any cost that you spend going into it.

Max: Yeah, good point.

Sean Pyles: But, yeah, there's been a lot of talk about a market correction for housing, and at NerdWallet, we expect prices to stay largely flat. This year, we've seen some dips in home prices, but it's not going to be as drastic as some folks have made it out to be. The National Association of Realtors estimates that the median existing home price will go up just 0.3% this year, which is good, but it's not a big drop like we were maybe hearing about.

Max: Yeah. To make it affordable, it has to go in the negative direction, right, which I don't expect that either.

Sean Pyles: Yeah, because I mean, technically, a correction would be when prices drop more than 10% from a recent high, and that's not really expected in a lot of markets except for places where prices are astronomically expensive like San Francisco.

Max: Yeah. And I don't plan on moving to San Francisco.

Sean Pyles: No, thanks. Unless you're a multimillionaire, it isn’t really feasible to buy a house there.

Liz Weston: I think a lot of people hear that a recession might be in the offing, and they're thinking the Great Recession where housing prices did plunge, but that was really so unusual. The last time that happened to that extent was in the Great Depression in the ’30s. So, yeah, I think you're right, Max. I don't think we're going to see this huge drop. And also with the Great Recession, there was a lot of funny business going on in the loan industry. The lenders were making really, really bad loans that people couldn't keep up with, and that led to foreclosures, which helped push prices down. We don't have anything like that going on right now.

Max: Yeah, that's part of my work is in the housing market and just talking with the several homebuilders that I know and their partners, it's definitely a different environment from a financing standpoint, like you said. So I agree with you, Liz. I don't think that we're going to see 10%, 20% drops, home values decreasing by 50%. I just don't see it anymore.

Liz Weston: Yeah.

Sean Pyles: And what is it that's making you think about buying a house? Is it the security of having a home or what's your motivation?

Max: Partly the security of having a home, but also partly as a, I don't like to say this because I don't consider your main house as an investment, but quote, unquote an investment, a place to park my money, knowing that if I need it, it's going to be available. There's all different kinds of ways you can use to help build your wealth with a house. Right?

Liz Weston: We were just talking with one of our fellow Nerds who owns, I think, what'd she say? 26, 27 houses, rental houses.

Max: Wow.

Liz Weston: Yeah, a lot. And she said a lot of people get started with rental real estate exactly that way. They have a primary house and then they move out of that, buy another, and they keep the first one and use it as a rental. So that's also a possibility. And Max, you've probably seen the statistics that homeowners do tend to create more wealth in their lifetime, so there are a lot of downsides to owning a house, but in the long run, it can be a good way to build wealth.

Max: Yeah. And that's the part of it that I struggle with the most. I've been a previous homeowner as mentioned at the beginning of the episode, but for me, the student loan debt, I mean, it's an unsecured debt. I've had it for roughly 10 years now, and I just want to be done with it.

Liz Weston: Yeah.

Max: It's an albatross on my neck, and making those payments every month for, I know I have my degrees out of it, but for nothing that's in the physical world to show for it, it weighs on you.

Sean Pyles: Yeah. I could see a world where you decide to rent out a fairly affordable apartment for a year or two, maybe get that less expensive bucket of a car, and then really work on funneling money toward your student loan debt just to get the burden off your shoulders because there's something very significant about not having that weight hanging over you and just being free of all that debt.

Max: Yeah, that's the part that I think is most enticing. I don't think I've known a professional segment of my career or any time in my adult life where I didn't have the debt, and that kind of makes me question things.

Liz Weston: Yeah. Well, let me give you a different perspective on this possibly. You said you're paying just shy of 5%, right?

Max: Correct.

Liz Weston: Currently, inflation's well over 6%. So it's relatively cheap money, and I know it doesn't feel like that when you're making those payments, but again, your interest rate is below the current rate of inflation. Now, that won't stay that way forever, but think about the fact that all the money you're sending to that student lender is money you can't get back in an emergency. If something really goes down and you need that cash, you can't go to whoever your lender is and say, "Hey, I made a mistake. Can I have that money back?"

Max: Yeah, "Let me grab … "

Liz Weston: Just doesn't happen that way.

Max: " … 15 of that back."

Liz Weston: Right. And the way a lot of people view a big amount of student loan debt is essentially a mortgage, and no, you don't have anything to show for it, but what you do have is some financial flexibility.

Max: Yeah. That's the other thing that I've thought about it, too, relative to the debt, because while the amount of money that I'm getting is not going to pay off the entirety of it, the other thing that I've thought about is treating it in that turn from saying, instead of having the $1,000 payment a month that I have, what if I just put that towards it and brought it down to $200 to $300 a month? It's way more manageable. I can balance that out for the long term and then live my life normally and start saving for a house and so on and so forth, because then I'll be able to breathe a little bit easier without having such a huge burden.

Liz Weston: You're talking about paying it down and then refinancing?

Max: Yeah, paying it down, and then refinancing it to adjust the monthly minimum payment, and then any extra money that I earned from side hustles or something like that. I've played around with that because at some point I've got to live my life. Right?

Liz Weston: Right.

Sean Pyles: Well, that brings me back to the amount that you have, $100,000. You can do a lot with that. Are you thinking about dividing up all that money into different buckets to spend on these different goals that you have?

Max: I've thought about that, too. Yeah, I've definitely thought about that as well.

Sean Pyles: Well, I could see a scenario where you do put maybe a third of that money toward your student loans, refinance that, get your monthly payment lower. Then you have a decent chunk of money to put toward a down payment on a car, a down payment on a house potentially. You said you're considering moving, which is also not cheap to do. I think you can accomplish many goals at once potentially.

Max: Yeah, that's a good point. I think part of my habits that I've developed in my professional career is I'm all or nothing with stuff. And I think part of that is learning the balance of giving up into the buckets like you suggest, and then …

Sean Pyles: Yeah.

Max: Tackling it that way from a comfortability perspective.

Sean Pyles: That's how I tend to approach things like this. Whenever I get a windfall, I think about how can I make as much progress on my many different financial goals at one time by spreading my money across these different areas, but I kind of like to have a little bit of everything all at once.

Max: That's a good way to put it. That really resonates with me as far as how do I make the most holistic progress forward versus just making the most progress forward on one thing.

Liz Weston: Yeah, that's it. When it comes to money, you really have to multitask. There's just too many goals that we have to make progress towards. Too many things that we could miss out on if we don't take advantage of them. Things like …

Sean Pyles: Too little time.

Liz Weston: Yep, exactly. You're talking about your company match. That's something that's a use it or lose it kind of thing. If you don't get it, you can't get that money back. So spreading things around can be a really good way to do this. And Max, I should have asked earlier, about how much have you got saved relative to your salary and your age?

Max: Yeah. So I started a little bit later from a retirement savings perspective — I'm 33 right now — and I started probably in my late 20s from a retirement savings perspective. But I think I'm on track. I've got about 15% to 20% of my annual salary saved up right now.

Sean Pyles: One thing that might totally throw you off track, but just humor me for a second here, is I was talking with my financial advisor recently about some cash that I'm going to be coming into through selling some stock, and she talked about an approach that some people take where if you're coming into a windfall like this, people will up their retirement contributions as much as possible and then live off of the money that they're getting so that way they can save as much as they can really and max up these retirement accounts and just live off the cash that they get because you won't be able to get a pretax benefit of contributing any sort of money from this windfall into a retirement account.

Max: I haven't thought about that before. And hearing you say that, I mean, it makes sense, right? Because, ultimately, the student loans are going to go away, but the benefit of having it now early on in my retirement savings could pay dividends way greater in the long run.

Sean Pyles: Yeah. And going back to the idea of time, time is so precious, especially since, you and I are both in our early 30s, we're not going to be able to get this time back.

Max: Yeah.

Sean Pyles: So the more you can save now, the easier things will be for you later on.

Max: That's a good point.

Liz Weston: OK, Max, not to freak you out, but there is a rule of thumb that by age 30 you should have one times your annual income saved up, so you didn't get a hugely late start. But that is a kind of ambitious goal for a lot of people. And if you're behind, if you're not quite on track to get there, putting more money into retirement savings, particularly Roths and Roth IRAs can be a really good way to start catching up. And the reason we talk about Roths is it doesn't have that great tax break upfront, but the money coming out in retirement is entirely tax-free and you've got a good salary going. Six-figure salary as I understand it.

Max: Yeah, correct.

Liz Weston: So you are likely to just keep rising in terms of tax brackets. So putting that money into a Roth now, or putting at least some money into a Roth now can give you a lot of flexibility in retirement. Having some tax diversification can be super, super important. And in that case, you don't have to wait and parcel out the money. You can just drop, what is it, $6,500 to an IRA?

Sean Pyles: Yeah.

Max: That's a good point. And I've heard about Roths before, and I know that there's a caveat to that as far as how much you earn relative to being able to afford a Roth, right?

Liz Weston: Yes. There are some income limitations. If those prevent you from making a direct contribution, there's a couple ways around that. One is to put the money into a traditional IRA and then convert it because there's no limit on conversions. That's called a backdoor Roth IRA.

Max: Oh.

Liz Weston: The other is a lot of times your 401(k) will have some sort of after-tax or Roth option, and you can use that and there's no income limit on that.

Max: Interesting. OK. Yeah, I hadn't realized that.

Sean Pyles: I'm going to take a hard left turn right now and say, we've been talking about very practical and rational things to do with this money that you're coming into, but life isn't all about work. We got to have some play. So have you thought about something fun that you would do with this money? Are there vacations that you have in mind? What would be something that you would really enjoy spending this money on?

Max: I am so happy you brought that up, Sean. I tell you, because that's the part of this that is mentally, I think, Sean, you and I are probably in a pretty similar spot. I mean, the millennial generation is a little burnt out right now. And for me, I've always wanted to take a trip to Ireland, Scotland and stuff like that. And part of me is let's just make this the best trip, and divorce isn’t an easy thing.

Sean Pyles: Yeah. Well, if you go to Scotland, I have some recommendations for you. I did a road trip a few years back with some friends, and it was fantastic.

Max: Oh, man. Yeah. Keep my email please.

Sean Pyles: Yeah.

Max: Well, I have thought about the fun aspect of going through such a traumatic event and realizing that life is all about balance, right?

Liz Weston: Yes.

Max: And wanting to do something fun and wanting to maybe take my brother or go on a trip with my parents or friends or something like that. That's crossed my mind, too, because we all need it.

Liz Weston: Yes. Oh, yeah. That's such a great idea.

Sean Pyles: Yeah.

Liz Weston: Again, a rule of thumb is when a windfall comes into your life, maybe take 10% of it and just blow it. And that's all about enjoying your life now because none of us are guaranteed good health, infinite life, infinite energy when you've got the opportunities to do this. And I love the fact that you mentioned friends and family because those connections are super important as well. So that's an investment in yourself, that's an investment in your mental health, that's an investment in your relationships. So it's not really blowing the money, it's just putting into something that's not as tangible as a house or maybe paying down debt.

Max: Yeah. And that's the part of it, I think, is why I was so focused on putting all of it, or a big majority of it, towards student loans, because I mean, at the end of the day, it's peace of mind. Right? Living under what I've been living under for the monthly minimum payments associated with this loan, it's taxing and it doesn't get easier.

Liz Weston: Yeah. Yeah, I hear that.

Sean Pyles: I think at the same time, though, there can be a lot of guilt around making decisions that are investments in your mental health and wellness that aren't the most efficient thing to do with your money, but that is how you get burnt out when you don't take the time to build space and invest in your own wellness and having things to do that are simply just fun for the sake of it. That's really important.

Max: Yeah. I've definitely been more active in hanging out with my friends, getting out of my apartment, going to see my parents and my family and taking little weekend trips to California and the beach and stuff like that. It's something that I neglected the last couple years, and that's my own fault. But you do have to have balance, and I think that's where I'm at the learning stage of right now, and money's a part of it. Right? I have a large chunk of money that I've never had before in my life, and I could just as easily blow it all or just as easily invest it all.

Sean Pyles: Yeah, it's a great opportunity, but also it's a challenge, and there's some homework involved, too. Whenever you have a new chapter of your life beginning, you sort of have to build it from the ground up where you think about, hey, what are the habits that you're really going to establish? What are going to be the parameters of how you're living your life to get what you want from it?

Max: Yeah, great point. Well said.

Liz Weston: I just love that you're asking these questions and you're thinking about all this. So kudos to you.

Max: Thank you. Thank you. I appreciate the time.

Sean Pyles: Of course. Well, Max, we've talked about a lot of different things that you can do with this money right now. Have you thought about how you're going to make this decision?

Max: Honestly, I'm pretty old school when it comes to stuff like this. My education is in engineering, so I take a very, very rudimentary pros and cons list. I look at data, and that's where I'm at with things. I'm smart enough to look at some of the future growth opportunities, but also there's that intangible side. And I'll ask you, Sean, I mean, was your Scotland trip worth it? You probably wouldn't trade that for anything, right?

Sean Pyles: Absolutely, yes. It was one of my favorite vacations I've ever taken with some of my best friends. And if I could do it again, I absolutely would.

Max: Yeah. And I think that the part that I struggle with for me is because I'm so factually based, how do you quantify that relative to the other stuff? And that's a challenge that I have to work through.

Sean Pyles: I mean, I guess I could quantify it in the number of photos that I have on my camera roll from that trip, which are numerous, I would say hundreds of them. And I don't even know how many orders of fish and chips I ate on that trip. I could quantify it through that. But it's really just the intangible memories and the opportunity to share time with those that you love, that you never get that again once the opportunity passes.

Liz Weston: Yep.

Max: Yeah, that's a good point. And fish and chips happens to be my favorite meal, so I think it might …

Sean Pyles: A win ultimately.

Max: It was meant to be.

Sean Pyles: Haggis, all of it. Yeah, it's great.

Liz Weston: Oh, you can keep the haggis. Thank you very much.

Sean Pyles: That's fair. Well, Max, thank you so much for joining us in this conversation. I hope that we've been able to help you think through your decision.

Max: You guys have. Thank you so much for the time today, and I really appreciate it.

Sean Pyles: Now, let's get on to our takeaway tips, and I'll start us off. First up, weigh your options. When you get a windfall, think about how you could use it to make progress on the financial goals that matter most to you. You might be able to do multiple things at once.

Liz Weston: Next, think about returns. Paying off student loan debt can lift a psychological and financial burden, but you could see better financial returns by investing for your retirement.

Sean Pyles: Finally, consider a splurge. Could use 10% of any windfall to buy or do something fun. And that is all we have for this episode. Do you have a money question of your own? Turn to the Nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at [email protected]. Visit nerdwallet.com/podcast for more info on this episode. And remember to follow, rate and review us wherever you're getting this podcast.

Liz Weston: And here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.

Sean Pyles: This episode was produced by me, Sean Pyles, with help from Liz Weston, Sara Rathner and Tess Vigeland. Kaely Monahan mixed our audio. Jae Bratton wrote our show notes, and a big thank-you to the folks on the NerdWallet copy desk for all of their help. And with that said, until next time, turn to the Nerds.