What to do with £50k?

[CatteryCat]

Long-term poster, so I’ve name changed as this is potentially outing. I’ll be receiving £50k in compensation for reasons I won’t go into.

I’m in my late 20s. My partner and I have a property mortgaged at fixed rate at 5% for another year. There’s £167k left on our mortgage. No dependents.

I have no other debts, except for my student loan.

I have a job, which is widely known to be low paid.

I also have a small amount of savings, so I’d definitely like to add some to my Emergency Fund.

I invest £200 in a S&S ISA monthly, which will be used in hope to retire early.

I don’t drive because I don’t need/want to (I live in a city centre).

What would you do with the money if you were in my position? I want to prioritise ensuring I’m making the most out of the money in a sensible way, but I’d like to set some money aside for a once in a lifetime holiday. 😊

What do you suggest?

5000 on holiday
5000 on emergency funds
And stick the rest on the mortgage - it'll take years off.

Pension pot

Just be aware that if you use it on your mortgage it will then be a shared asset between you and your partner.

Agree with PP, put majority towards pension after putting some aside for your holiday and emergency fund.

I would have a look at something like Dave Ramsey’s baby steps, to see where you are ‘up to’ and then use them money to fill in any steps you may have jumped over.

I think on a basic level, his Baby Steps set out a road map to build financial security. If you don’t like him, there are a few other people with similar ‘steps’ or ‘road maps’. Use the time before you get the money too look at them all and chose the one you want to commit too. The key is long term commitment. Spending the money this way won’t be flashy or exciting, but it will set you up for long term success with money and financial security.

To help, the first few steps are:

1. $1000 beginner emergency fund
2. pay off all debt except mortgage (this includes student loans)
3. build to a 3 month emergency fund
4. invest 15% of your income for retirement
5. etc etc

Not the mortgage unless you can protect it- I wouldn't 'share' it in finances with your partner as it's compensation from something that affected you- and I'd tell anyone male or female the same. I would put it into something that long term benefits you as it's not a joint income.

You will get most value from putting some in a pension, but you can't get at it until you are about 50. If you are in a low paid occupation it might be the best idea.

Are you currently paying off your student loan? If you are not then it makes no sense to pay it off if you may never pay it off.

To be honest I think your best bet would be to see an independent financial advisor.

Premium Bonds. You can get at the money easily if you want to and it's safe.

Paying off a student loan would be not advisable in someone with a low paying job as v few people now clear there's and it should be more deemed a graduate tax (money-saving expert has good explanations on this)

I'd favour a s&s lisa over normal s&s isa if you def don't think will need it before retirement as for every 4k/y you put in, the govt gives you 1k for free ontop

If young I'd put into a pension (sipps etc)

Caution with the mortgage as although makes financial sense unless you get a declaration signed with your partner it will be joint money in a split

Prob worth seeing a ifa

Have a look at the savings and investments flow chart. I can't do links but it is easy to find if you search on line.

Six months expenses in an easy access place, could be Premium Bonds,
Then pension
Then longer term savings.
Mortgage repayments are a good idea if your relationship is rock solid.
Otherwise keep your money in your name as inheritance can be protected if you split as long as it was never in joint accounts

For the immediate, while your thinking what to do, or even long term, pop it into a savings account because it will earn you £225 approx a month at a 4.5% interest rate.

Dave Ramsey is good but this is an American site and the student loan thing would only apply in a few circumstances in the UK - for high or fairly high earners, and it definitely wouldn't be step two , would probably be step 5 in the UK or 6.

Use up your ISA allowance and then premium bonds.

I know Dave Ramsey is American, and his advice predominantly aimed at that market, but his underlying process about ‘steps’ to build financial security are sound. It’s why I suggested the OP look at him, and other financial advisors like him that have ‘steps’ or road maps, then read about why they recommend the order of steps they do, and choose the one that works best for her situation.

Check if you can withdraw any money out of your pension pot in case of major problem, age 55 yo is typically the norm.

This.

Perhaps see a financial advisor to work through the best options for you.

Holiday, and rest on mortgage

Do check your tax situation if you do this. Most people pay tax on it if they earn over £1000 interest in a tax year.

Put 10% as an over payment on your mortgage now. Put the rest in premium bonds til you decide

Pay for a consultation with an independent financial adviser? (Not one that costs £50,000 a session!)

As not married do not pay off any extra mortgage.

Keep paying in to your ISA, which will be 2400 for the year. That means you have 17600 left to put in an ISA either the one you already have or open another.

Then put the rest in a savings account and transfer 17,600 to an ISA on 6 April next year if you are keeping your pay monthly ISA. You won’t make enough interest to hit 1k in either this tax year or the next. I have moved my ISA products round multiple times for best rates.

You can currently pay additional voluntary contributions in to your pension of up to 60k per annum, it obviously depends on how decent your scheme is. You could consider making additional contributions a month direct from your salary.

You don’t need a financial adviser for an amount this size.

If you put it into anything shared (like the mortgage) make sure you get it protected in case or a split.

@ruffler45 Legislation is changing, well it’s not being renewed and pensions will not be able to be accessed till people are 57 from April 2028. This is mainly because so many have done it. The Labour and Conservative parties have both made it known that there are too many over fifties that have stopped working. Rachel Reeves was reiterating this just a couple of weeks ago.

Pay off the student loan, that's the highest interest

This is not a good use of the money for someone in low paid work who is not likely ever to have to pay it off.