Redundancy

[majormumma]

Getting made redundant in the next month and taking home an OK package of about 12k. Don’t have any debts. The money is burning a hole in my pocket already and I don’t even have it yet 🤦🏻‍♀️ but determined to be sensible. Any ideas/ thoughts where to save or other investment ideas. And for the fun of it, what would you do? I know it’s not alot of money by any means but it’s the most I’ve ever got in a lump sum.

I’d save it for a rainy day. Have you got another lined up?

Have you got a new job yet? Do you have a mortgage? I overpaid my mortgage with my redundancy payment last time.

Yes new job lined up for January start.
Yes mortgage but I think our property has gone down in value since we bought so would it be wise to pay more off of the mortgage?

Are you in negative equity though? Because unless your mortgage is more than the re-sale value of the house, you still have an asset to invest in. What is your loan to value based on a realistic sale price? When is your mortgage fixed until and do you need to remortgage in the next 2-ish years? All this impacts on what you should do with the money. If you need to remortgage in the next few years, and paying off some of the mortgage gets you into a new LTV and access to better mortgge rates then it's sensible to do that.

The general advice is also that if your mortgage rate is more than you can get in savings, then pay off some of the mortgage. If you have a long fix, and your LTV is already under 60% and your mortgage rate is lower than current savings rates there is probably less of a case for repaying mortgage.

If saving it, then before you lock any away in a longer term investment for a higher interest rate, make sure you have enough savings accessible for at least 3 months household outgoings (I'm risk averse and want at least 6 months) This protects you from unexpected job loss (there is no redundancy entitlement in first 2 years) or long term sickness and running out of sick pay. You just never know what life can throw at you.

And if if you really can't bear to be sensible with all of it & can afford it, maybe buy a small treat (something nice for the house you've always wanted?).