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I won a sweepstakes and will be getting USD 50k...it is verified that it is legitimate although no taxes have been taken out so I will have to claim this income on my taxes next year, they will send a 1099. I do have a significant amount of student loans (a little greater than 50k) & I am currently in school now (through a scholarship) finishing my degree so I am not paying towards the principal right now only small interest payments. I also have credit card debt (under 10k) and a car loan (around 15k)—recently my income increased, for the last 3 years I made around $25.00/hour and prior to that I made around $13.00/hour, which is how I incurred the credit card debt. I am wondering if it would be wise to invest this money into a business or real estate after paying off my credit card debt.

I am 30 years old, live in Indiana, a single parent with three children, I work full time, and go to school online. I make a decent amount of money now US$50.00/hr & work 36 hours a week, I am renting US$1040/month, plus have credit cards and car payment (5.5% interest). I have a 401(k) with about $15,000.00 in it and a regular savings account with around $2,000.00 in it. I just recently started making $50.00 an hour & I realize with my job earnings I could get out of debt in a fairly reasonable amount of time depending on how aggressive I pay. I also know the USD 50k won't get me out of debt completely either, so I thought paying the high interest credit cards off and then investing the remainder into starting a business or a property might be the best idea to create another stream of income...(?) I had no intention of quitting my full time job. I just wanted to possibly gain insight to other options outside of throwing all of the money to debt or wasting it all.

Emily
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    Please add a country code. – RonJohn Jul 13 '19 at 05:54
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    A bit more detail would help. Does you employer offer a matched 401(k)? And if so, do you deposit to get the full match? How much CC debt? What does a suitable (for you) home cost in your area? – JTP - Apologise to Monica Jul 13 '19 at 13:19
  • In addition to what joetaxpayer is asking for, what interest rate(s) are the student loans at? What is the balance and payments? Ron Jon’s answer is about the best you can get without much detail, but it’s possible with a lot more details another plan might be better. – T. M. Jul 13 '19 at 15:22
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    While 50k is nothing to sneeze at, do realize that in the course of your entire life, it is not actually all that much. For most people working in the U.S., it is not even 1 year of income. Assuming you work 40 hours a week, it's only about half your annual income. – jpmc26 Jul 13 '19 at 15:28
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    $50/hr doesn't mean much without saying how many hours you work. – chepner Jul 13 '19 at 16:05
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    Please don’t take this the wrong way: scams are much more common than sweepstakes. Take care to be sure you’ve won something legitimate before you go spending your windfall. – thehole Jul 13 '19 at 19:23
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    You might want to replace your hourly income rate with your yearly income rate. We might do the conversion for you if we could assume that you worked full-time or something, but given that you're a student and a single-parent of 3, it's unclear if that's necessarily the case. – Nat Jul 14 '19 at 00:21
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    @thehole : especially if it's a sweepstakes you don't remember entering, and they first need you to pay some fee before getting your reward. Then it's 100% sure it's a scam. – vsz Jul 14 '19 at 09:59
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    See Oversimplify it for me: the correct order of investing for some thoughts on what you should do with windfalls like this. – Ben Miller Jul 14 '19 at 12:02
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    If you want more specific advice, you’ll need to share more information. Which country do you live in? What is your annual income? How much debt do you have? How much are you currently saving for retirement? How much do you already have saved? What is your age? – Ben Miller Jul 14 '19 at 12:04
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    Are you self-employed? Are the $50/hr before taxes? – Klaws Jul 15 '19 at 09:23
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    If you wouldn't take out a loan to start a business, don't spend windfall money doing the same unless you just like gambling. – J... Jul 15 '19 at 13:29
  • @RonJohn form 1099 is IRS – NotStanding with GoGotaHome Jun 20 '22 at 15:10
  • @NotStandingwithGoGotaHome look at the edit history and dates. – RonJohn Jun 20 '22 at 17:04
  • @RonJohn So there was 3 days till the edit since your comment. – NotStanding with GoGotaHome Jun 21 '22 at 02:37

10 Answers10

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EDITED after OP added more details.

no taxes have been taken out yet.

24% will probably be withheld, taking you down to 38K.

The organization that ran the sweepstakes must withhold 24%. It's the law, and of course you have to claim it on your tax return, whether or not they withhold anything. Because they'll withhold, they'll send you a W-2G saying how much they withheld, and you'll put that + the $50K in your tax return.

But if for some reason they don't withhold 24%, you should "self-withhold". And pay quarterly taxes, so you don't get fined by the IRS.

so I thought paying the high interest credit cards off

The stunningly high interest rate on credit card debt lights your hair on fire, and dousing the fire on your head is naturally of prime importance. Thus, yes, paying that off it the top priority.

and then investing the remainder into starting a business

What business?

or a property

Do you have the will to become a landlord, and all the headaches (taxes, repairs, maintenance, trying to evict unruly tenants that know how to game the system, etc.) that come along with it? (Remember that hiring a property manager cuts into your profit.)

might be the best idea to create another stream of income that can then be used to get out of debt...?

Let me play devil's advocate:

  • Do you have the entrepreneurial spirit and an existing solid plan, or does it just sound cool and inspirational?
  • Since most small businesses fail, what will you do when you fail and wind up in even deeper debt?

IMO, you should:

  1. pay off the credit card debt,
  2. Add another $1,000 to your emergency fund,
  3. EDIT from @Falco comment which I like: Have some fun with a few thousand dollars.
  4. pay off as much of the student loan debt as possible (being careful about prepayment penalties, etc.) use the rest for tuition so that you don't accumulate more student loan debt,
  5. add the monthly money you were paying towards the credit card debt to your student loan debt payments auto loan payments, and
  6. learn where your money goes, so that you don't add any more debt,
  7. build up your e-fund to higher levels.
RonJohn
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    @jpmc26 "should" and "does" are two different things. My ex-wife and I (when she wasn't my ex-wife...) were deep in CC debt even though we made more than OP. It's all about the motivation to actually do it, and we didn't have it. Once I got it, we were on our way to debt freedom. – RonJohn Jul 13 '19 at 15:37
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    Regardless of what is/isn't withheld you need to plan for the taxes so you don't end up in a bad spot come April (assuming US), likely 24% bracket for federal and who knows for state. Also, $1,000 is pretty lean for an emergency fund when you are a single parent with 3 kids, I'd up that by a bit but otherwise would follow this answer. $50/hour and $1050/month for rent suggests you should be able to get out of debt pretty quickly once you make it a high priority. – Hart CO Jul 13 '19 at 15:49
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    @HartCO $1K is the "first baby step" e-fund you have while putting "everything" else into debt reduction. Then build the e-fund to "standard levels. – RonJohn Jul 13 '19 at 15:52
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    I know that's the canned advice from some (and I agree with the approach for many people), I'm saying for OP's scenario with a windfall it might make sense to sock away a little more up front, would depend on student loan rates, but if they are only 3-5% then having say a $5k emergency fund would be more appealing to me. Just a matter of preference/priority, I happily pay a little more interest by having a very large liquid reserve instead of paying off all my mortgages. – Hart CO Jul 13 '19 at 16:01
  • @HartCO is SL debt in the same category as mortgage debt? It's usually higher (and can't be expunged during bankruptcy). – RonJohn Jul 13 '19 at 16:05
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    Depends on rate, my student loans had comparable rates to mortgages. With 3 kids as a single-parent, $1k wouldn't go very far and you'd be back to credit card debt in an emergency, if the student loans aren't too bad on rate then probably makes sense to reserve more. It's like insurance, it costs a bit but if you need to use it it can save you a lot. – Hart CO Jul 13 '19 at 16:13
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    The OP also mentions being in school; it's not clear that they are actually paying off the student loans yet, rather just acknowledging that they are debts to be paid at some point. – chepner Jul 13 '19 at 16:14
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    @chepner the $50/h job suggests to me that they're probably working full time and doing school on top. Jobs paying that well that are part time are relatively rare. – Dan Is Fiddling By Firelight Jul 14 '19 at 19:47
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    I'd also add - as a fellow single parent - you have ZERO time to invest in property management and ZERO time to deal with risks of a startup business. Keep your $50/hr job and get out of debt with everything you have. Time is more valuable than money (you make enough to get by) when you are a single parent. – Paul Jul 15 '19 at 13:13
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    $38K isn't great for starting most businesses or investing in a property. There are cheaper properties but its a lot of work even on a cheap property. – Mark Rogers Jul 15 '19 at 14:47
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    I'd suggest that the OP uses the "few thousand dollars" to get something that isn't a money pit. For example: motorcycles are fun and have a huge cool factor, however they can easily suck down hundreds and thousands of dollars a year in repairs and "upgrades". Yes, the OP needs to have some fun, but not at the expense of future money, since that could get them back to where they are now, or worse. – computercarguy Jul 15 '19 at 20:18
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    @computercarguy right. A vacation, some spa treatments, new clothes, new computer, etc. – RonJohn Jul 16 '19 at 07:24
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    This answer needs "the 50,000$ sweepstake is probably a scam, because far more people are convinced they have won a 50,000$ sweepstake that turns out to be a scam than actually win one.", as well as links to how to determine if it is a scam. (For example: they give you 50,000$ "in your account" then get you to "pay taxes" by transferring money out; then the 50,000$ disappears) – Yakk Jul 16 '19 at 14:27
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    With the edits to the Question, the OP can pay off their $10k in CC debt and $15k in car loan immediately. I like the idea of using the rest to not get more student loans, but if they are done with taking classes, they should consider paying off several of the smaller or 1-2 of the larger loans immediately. This will save a lot of money in interest later. Also, they should avoid using CC's again. They are useful in extreme emergencies, but not for simply delaying payment, unless they are rigid with paying off the CC Every. Single. Month. – computercarguy Jul 16 '19 at 16:01
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You make $50/hr and are in debt? This is a serious problem!

The $50K is a distraction.

This is what I'd do:

  1. Pay off any high-interest debts (say 7% and above) up to ~$40k (saving some for taxes, ignore if they're already withheld).
  2. Stick remainder in a High Yield savings account (e.g. Ally) and forget about it.
  3. Discontinue use of credit cards, if you're carrying a balance then they're not safe for you to use.
  4. Take this opportunity to learn about budgeting and money management.
NPSF3000
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    In many parts of the US a single parent of 3 making $100,000/year is not at all wealthy. – arp Jul 14 '19 at 01:43
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    @arp judging by the rent payment, I'm assuming she's doing okay if working full time. The stated rent would cost about a 1/10th of that. – kuhl Jul 14 '19 at 03:11
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    @arp agreed. However, my answer applies to that situation as well. If you're struggling on $100k/year - like getting into credit card debt level struggling - you need PF skills, not $50k. One can change your entire life for the better, the other can dig you into a deeper hole than when you started. – NPSF3000 Jul 14 '19 at 15:59
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    I don't know about other places, but where I live, with a full-time job at 50/hour, you should be withholding something like 15k for end of the year taxes, at least. – Patrick M Jul 14 '19 at 16:51
  • @PatrickM beyond income tax? She rents, so no property tax. – RonJohn Jul 14 '19 at 20:27
  • @RonJohn At around $100,000/year, you might get a marginal tax rate of 20% federal income tax, and near 10% state income tax (depending on the state). – Patrick M Jul 15 '19 at 04:41
  • @PatrickM the money will already be withheld. https://www.efile.com/taxable-gambling-winnings-income-taxes/ "gambling winnings over $5,000 are subject to income tax withholding: Any sweepstakes, wagering pool (including payments made to winnners[sic] of poker tournaments), or lottery." – RonJohn Jul 15 '19 at 04:48
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    My ten-wife and I made $100K+/year and were in serious CC debt, plus had a van note and mortgage. – RonJohn Jul 15 '19 at 20:23
  • I make about 50/hr and am in debt and will be for 9 more years. I could pay it off immediately. I make money faster on the stock market than the interest takes. – Joshua Jul 16 '19 at 02:23
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    @Joshua keep in mind that the OP's debt includes high interest credit card debt, is a student, and is thinking of 'starting a business' to 'get out of debt'.

    Context matters.

     – NPSF3000 Jul 16 '19 at 02:27
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    So I recently started making $50.40 an hour, prior to that I made exactly half of that, which is why I have the credit card debt... I also have a car note (at 5.5% interest rate) and my student loans. I work full time 36 hours per week & I go to school online. To clarify I wasn’t going to quit my job I just wanted to create another stream of income... – Emily Jul 16 '19 at 06:35
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    @Emily great to hear! However, the advice still stands. You have a full-time job, three kids and are studying. This is a great time to learn Personal Finance (here, and Reddit has a good community as well) and a very poor time to build a business - and I say that as someone who is a startup entrepreneur.

    Get a good foundation down first, and then in the future consider the business opportunity when you have the time, energy and money to invest in it.

     – NPSF3000 Jul 16 '19 at 12:33
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Not sure if I've read properly, but 50k is not all that much, even moreso as existing debt is involved (was it maybe 500k, and I misread?). Insofar, the mere idea "Should I buy property or start a business or something" makes me go "WTF?!", sorry.

Debt, especially debt with high interest rates (credit cards?) eats away your assets, and it does that constantly, every month. So, the only reasonable thing to do when one has debt and useless money lying around is to eliminate the debt. Debt gone, regular drain of money gone.

Unless of course, you have a secret master plan which will, without risk, allow you to gain higher interest than the one you have to pay for your credit cards. If you have such a plan, please tell me! Count me in.

Interest, generally, gets better the higher the risk. Worded differently, the only ones who will pay interesting interest are those whom you actually don't want to give your money (in fear you will not get it back). They wouldn't pay that interest if they hadn't to. The same goes for investments of virtually every kind. No risk, no revenue.

So, making a better bargain than what you have to pay to your bank is... hard, and risky. Why do that if you can eliminate the steady drain of money by paying off debt? Not losing money every month is, finally, the same as gaining money every month. Only just, no risk.

Also, 50k minus tax, minus small change, is, well, not precisely nothing, but in terms of "let's buy property"... I mean, what do you expect to buy from that? Maybe you can get some desolate shack in some desolate place somewhere, but something that has a fair chance of actually being worth its money and bringing back significant money? Not sure. It depends on where you live, but where I live, that would be a ridiculous idea.
Unless of course, you're willing to take up significantly more debt, which will mean even more monthly expenses. Sure, if the property is rented, you can cover these expenses from the rent. But if you fail to find a tenant, or if you tenant turns out being a hobo who doesn't pay, well, you still have to pay the interest, or the bank will just take away your property. There we go again, risk.

Damon
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    DV for imo unnecessary (and distracting) snark in the answer. Also, say there’s $40k left, that’s a down payment on a $200k house, which could plausibly end up around the same $1040/mo housing expenditure, but now towards a mortgage instead of rent. – thehole Jul 13 '19 at 19:35
  • "master plan which will, without risk, allow you to gain higher interest..." Since interest is a measure of risk to the time-value of an asset, it doesn't even make sense to form this thought, let alone refute it. – jpaugh Jul 14 '19 at 00:22
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    Good luck getting a mortgage, especially at a recent rate, when you're already in massive debt. – R.. GitHub STOP HELPING ICE Jul 14 '19 at 16:46
  • @thehole: Your suggestion might be a good idea, in the long term. It won't solve any problem for OP now and will only add debts at first, though. – Eric Duminil Jul 15 '19 at 08:37
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    @EricDuminil yep, that’s why I didn’t make it an answer. I was just pointing out 2 things: 200k is enough to get you plenty of house in lots of places, it wouldn’t have to be a desolate shack in a desolate place; and, there is some ambiguity in OP’s post about whether they are considering an income property or not. – thehole Jul 15 '19 at 14:11
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    @thehole: Yes, only just 50k and 200k is not the same. 200k means +150k debt. If you are already in significant debt, your interest rates for that loan (if you get one) will be a nightmare. The worse your credibility, the higher the rates! So that's the exact opposite of what one would want to do, it adds to the monthly-being-milked-for-debt. Also, that doesn't even take tax into consideration... – Damon Jul 15 '19 at 14:25
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    @Damon there’s a lot of detail missing from OP to make any recommendation more helpful than vague rules of thumb. I’m not advocating for OP to buy a house, I’m saying if they did, it wouldn’t necessarily be a hovel like this answer states. I’ll also say if homeownership is a goal, this windfall is a shortcut past clearing yourself of debt to acquire a down payment, so OP could have a house tomorrow instead of in 35 years when they’ve paid off the loans and saved enough again. And even at high interest, OP should be able to trade rent for PITI in a lateral move. – thehole Jul 15 '19 at 21:50
  • @thehole: Before being edited into something completely different, the question was very clear (but even now, the situation doesn't really change). $50/hr, working 36 hours became $25/hr and student. So, ~2000 gross minus tax, minus rent, minus 3 children eating and stuff. That makes yanking out an extra 115 every month to pay car and CC rates quite a challenge. Add a 150k loan? Good luck. I'd get a loan at well under 1%, but I'd guess OP will rather have to pay 7-8%. Let's assume 5%, that's another 625 per month that must come from somewhere. Every month. – Damon Jul 16 '19 at 09:47
  • I think we’re talking past each other a little — I think you’re considering buying a property outright with what’s left over. I’ll concede that probably won’t be useful. However, my point was that’s not the only way to acquire property (making no judgment on whether it’s appropriate for OP). Will the interest be high on a mortgage? Probably. Personally, paying a bank for my house is preferable to paying a landlord for theirs, and I’ll pay a premium for the privilege. I’ll also, though, concede this isn’t the case for everyone. – thehole Jul 16 '19 at 13:51
  • @Damon I’m not sure how the original question changed when I edited... someone in the answers had asked how I got in credit card debt making $50/hr ...I indicated I recently (less than a year) received this increase and that prior to that I was making $25/hr and utilized credit cards in some situations. Thank you for your input. I suppose I was reaching with an investment property...I worked for the local housing agency a few years ago and saw a lot of young landlords buying foreclosures and then renting them for profit – Emily Jul 17 '19 at 00:51
  • Erm yeah, sure. It's just not what I would recommmend, especially when 3 children need to be fed. Why? Well, look what happens in the USA whenever anything happens. Ten thousands (hundred thousands) of people lose everything they own, and have no chance to ever recover during their lifetime because they were stupid enough to buy stock options, or property, or whatever from money that they didn't have, driven by greed and the idea of making profit out of nothing. This "works" as long as there are bigger fools around, until suddenly it doesn't work, at which point you can hang yourself. – Damon Jul 17 '19 at 12:50
  • I am not doubting that there exist individuals who took up massive loans and bought property, rented it, and got rich without working. Similarly, there exist individuals who took massive loans, bought stock options, and got rich over night. There's people who won 150 million in the national lottery, too. But they're few. For almost everybody else, it's an immensely unwise strategy. Most people get poor, and in such a manner that they never get on their feet again. Debt is designed to keep the poor poor forever. You work, and your money disappears. That's why one wants to get out of debt. – Damon Jul 17 '19 at 12:56
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Starting a business isn't really a viable option for getting out of debt, unless you really know the ins and outs of whatever business you'd get into. Most new businesses fail. Even the successful ones will probably require a long slog before turning the corner to profitability.

Your first priority*, of course, is to pay off the high-interest credit card debt. After that, you should look at putting some money in an IRA, just to ease the tax burden.

Since you say you're in school, I'm assuming you're not yet making payments on the student loans. If you are, look at the interest rates, and how they compare with long-term investment returns.

But in general, you should invest the rest, other than a couple of thousand kept as an emergency fund. Depending on how likely you are to need the money in the near future, your choices range between index funds (if you likely won't need it soon) and stable value funds.

*After Uncle Sam takes his cut. That might be taken out by the people who run the sweepstakes. If not, you need to look into estimated taxes.

jamesqf
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    'Invest' means different things to different people. Might I assume you're talking about an index fund? – jpaugh Jul 14 '19 at 00:17
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    @jpaugh: An index fund is one option (and probably the one I'd choose), but there are others, such as the stable value funds I suggested: https://www.investopedia.com/terms/s/stable-value-fund.asp And of course there are intermediate risk funds that keep a large fraction of their assetes in bonds &c, plus market sector funds of all sorts. The point is that with something under $50K, it simply doesn't pay to do your own investing. – jamesqf Jul 14 '19 at 16:50
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I think it's worth emphasizing @thehole's excellent comment in an answer that will remain... Scams are much more common than actual sweepstakes! Be certain you're actually winning something for real before spending/counting on any of it. The consumer bureau of the state this sweepstake comes from should be of some help in verifying their legitimacy.

If you get any sort of request for money in order to collect your winnings, please heed that big red flag. A legitimate prize will not ask for taxes, handling, good faith deposit, any sort of fee! Or possibly even worse, details of your bank account (including password) so they can do an automatic deposit.. Talk to your local police department, check out the helpful FBI Internet fraud resources https://www.fbi.gov/scams-and-safety/common-fraud-schemes/internet-fraud don't just fall for something because you need the money

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Overall I like Damon's answer, but I'd like to suggest an option taking it further. Absolutely spend all of the money paying off debt.

You have a choice between paying off high-interest-rate unsecured debt that can be discharged in bankruptcy, and low-interest-rate debt that can't. From a numbers perspective, the credit card debt is the better choice to pay off, and you'd only choose the student loans if you think you have a significant risk of needing to exercise bankruptcy rights.

However, in your case, you're considering blowing $50k on gambling (which is what "start a business or buy property" is when you already have that much debt and not much money relative to what it takes to start a business). This suggests a level of financial unawareness and irrational risk-taking whereby I'd seriously consider getting rid of as much of the student debt as possible, which can't be eliminated in bankruptcy, as the priority.

Bob Baerker
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R.. GitHub STOP HELPING ICE
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Pay off loans, highest interest rate ones first.

And get a plan in place, a SERIOUS plan, to reduce spending and get rid of the other loans.

Analyse what all you're spending your income on, and cut it down to the bare basics, using anything left over after that to pay off the rest of your loans.

When you're done with that, put half of what you have left over into savings accounts and have some fun with the rest (or use it as discretionary spending for unforeseen expenses).

Investing money, buying property, things like that are NOT what you should ever consider if you've loans outstanding.

jwenting
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First pay off any debt you have.

Find a financial advisor and put it in an index fund that has decent growth and don't touch it until retirement. Some funds can get in the range of 8 to 10% with minimal fees. Lets suppose you put down 30K in a fund: 8% per year (average) would get you 200K in 25 years, and a fund with 10% would get you 325K. This is with no contributions.

I have found that there is no equal with the time value of money, while I don't have much now, I hope to in the future.

Voltage Spike
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I agree with most -- perhaps all -- of the advice already given, but one point has not been raised, by either the OP or any of the answers.

What are your career prospects? You have just gone from $25/hour to $50/hour -- a handsome raise. You must have done a lot of things right, from the point of view of your employer. If you concentrate on your current career, what do you see happening? Obviously, you are unlikely to get another 100% raise soon, but it is also unlikely that you have hit an indefinite plateau at $100,000 per year.

My advice, in addition to paying off the high-interest loans and allowing yourself a bit of fun, is to work hard at your current career instead of diluting your efforts with a start-up business or real estate. The only thing that might change that advice is if you already know a lot about the business you are contemplating and also about running a business. But that doesn't seem to be the case, from reading your question.

ab2
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Typically what I would do is pay down quite a bit of the debt with half of the windfall, so 25-30K immediately used on the debt.

Then use the remaining amount to just extend my runway a bit more, amplifying the monthly payments I make on the debt. In the US I can extend my tax payment due date till October of the following year, giving a max of 20 months to figure something out.

Most of my debt would be for non-consumptive purchases, so business spending, therefore the interest is also deductible. There is no way for an outside observer to differentiate between irresponsible debt and a calculated risk that involves debt, invalidating many of the answers here. Deductible interest payments completely changes the calculus for what needs to be done, in what order.

For example, if you used all of the money on paying as much of the debt as you can, just to "pay off higher interest debt first", now you are in debt to the government for taxes, and you still have debt incurring interest. This is a worse situation than the one you were in before. On the contrary, if you "extend and pretend", where you extend the real due date of social and reputation problems associated with high debt and potential default, while pretending everything is going to be okay, you get the benefits of: deducting so much interest (if applicable) that there is no tax on the winnings, having a potentially higher salary from your career growth over time letting you pay it off faster anyway, and maintaining your relationships with lenders.

With some of the debt paid down, you could also be eligible for additional credit that would allow refinancing to lower interest debt, and also lowering your utilization, increasing your social standing.

CQM
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    Extend your runway? Also, "they" will almost certainly withhold 20%, so "now you are in debt to the government for taxes" is a non-factor. – RonJohn Jul 14 '19 at 21:18
  • "if applicable" is the right term on CC debt, and... it's not applicable. – RonJohn Jul 14 '19 at 21:19
  • @RonJohn why not applicable? you can deduct interest on business purchases on a credit card even if you co-mingled personal and business. Its up to OP to tell us whether that is applicable or not. They are clearly entrepreneurial, and with their high hourly wage are probably a contractor. – CQM Jul 14 '19 at 21:26
  • That paragraph says "On the contrary, if you "extend and pretend" regarding not paying off her existing CC debt. – RonJohn Jul 14 '19 at 21:34
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    @RonJohn How does that make any of this inaccurate, you didn't answer my question about why is this not applicable. CC debt has nothing to do with whether my answer is accurate or not. OP, She, has to tell us whether its deductible interest payments and that changes the whole calculus on whether its best to pay down existing CC debt now or create a more favorable situation as the one described – CQM Jul 15 '19 at 04:04
  • Sure I answered your question about why it's not applicable. I even bolded it: existing CC debt. – RonJohn Jul 15 '19 at 04:06
  • @RonJohn my whole answer is about what circumstances you would ignore that logic. It specifically says the problems OP would have if she "pays off higher interest debt first" just for the sake of following a personal finance religion instead of approaching her problem holistically – CQM Jul 15 '19 at 08:58
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    Since taxes are a debt that the government mandates be withheld by the sweepstakes holder, "now you are in debt to the government for taxes" is moot. It's factually incorrect. – RonJohn Jul 15 '19 at 09:02
  • @RonJohn yes, if she has no ability to spend the whole winning because a portion of it is already withheld, then it isn't an issue. If the interest is deductible and lowers her AGI then the government will refund her from withheld portions of her salary and sweepstakes winning. – CQM Jul 15 '19 at 11:03