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?

My suggestion for what its worth

1. You can get lots of 'greater than inflation' fixed term savings accounts with no risks attached if you are happy to tie up your money for as little as a year
2. Overpay some of the mortgage - this reduces the term and makes a significant interest saving
3. Personally I regard the Stock market as a Ponzi scheme AND a lot of the return goes in management charges
4. If you put money in an ISA you dont get tax relief putting it in, BUT its tax free to take out AND you can take it out when you want eg if you have children, want to retire early etc etc
5. Solar Panels and a battery, my brother has just installed this and saved a huge amount on electricity tax free. This assumes of course a freehold house and you intend to stay for a long time.
6. start a small home maintenance/improvement fund

Above all get some benefit from it, make sure you can look back in a few years and know where it went, and enjoy!

Just seen elsewhere on Mumsnet that Martin Lewis has a calculator to show you what you can save on overpaying the mortgage

At your age, it would be great to put a chunk of money in your pension pot. It'll have many years to grow.

I'd definitely have a big holiday (I recommend Tobago!) and put some money in your savings account for a rainy day or alternatively in premium bonds because you can cash them in pretty quickly.

5000 holiday
10000 rainy day/premium bonds
25,000 pension
10,000 mortgage

Thank you. I won’t be paying any of my student loan with it. I’m on Plan 2 and I’ve never earned enough to make a single contribution, I doubt I’ll ever will…

I forgot to say, my workplace pension is at the legal minimum. Both for my contributions and my employers… Should I consider putting a portion of the money into my S&S ISA instead of my workplace pension?

Be aware the student loan works very differently in US. If this is relevant check your plan as well as it may well be worth just ignoring this particular debt depending on when you went and how the interest works

Thank you.

I’d like to spend the money on, in order of priority.

1. Adding to my Emergency Fund.
2. Investing some in my S&S ISA (hoping to retire early).
3. Get a Declaration of Trust to protect my share of the property, in case we split, and then overpay some of the mortgage.
4. Dream holiday for DP and I.
5. Buy my dream bag, which is the Celine medium Nino in pebble. 😍
6. If there’s anything leftover, I’ll spend that on redecorating the bathroom.

My only problem now is that I don’t know how much money to use for each one e.g. How much of it should I invest (lump sum)? How much should I overpay the mortgage? How much should I spend on the dream holiday? Etc.

If def don't need access before retirement put 4k pa into s&s Lisa so you get the govt 25% bonus

Is it worth having one of those as well? I’ve already got a S&S ISA, which will be used as an additional pension.

I was concerned that putting money in a pension pot can lock the money away where it could not be accessed in an emergency, even more so if age 55 will increase to 57 in the near future

https://www.aviva.co.uk/retirement/pension-basics/changes-to-pension-age/#:~:text=From%206%20April%202028%2C%20the,have%20a%20protected%20pension%20age.

Financial adviser the way forward.

Thanks!

OK I gave it a bit more thought

1. The recommendation is that you need about three months salary in 'immediately accessible' savings. If you and your partner each earn about the national average wage thats £15k. Obviously some savings eg your ISA and my suggested house fund could form part of that figure.
2. I have no idea what your dream holiday would cost, sadly The Wolsztyn Experience is no more so driving steam trains in Poland is out but there is still https://savethepuffer.co.uk/ but I assume £15k would buy you a pretty good one
3. If you paid off 5% of your mortgage and put a similar amount in a 'house repair or improvement' fund thats about £15K
4. That then leaves enough to get your bag, £2 - 3K safety boots and overalls for the puffer trip and if whats left isnt enough to do the bathroom then thats what the house fund is for

savings mainly

Whatever you do, do not bother paying off any of your student loan. Literally the worst waste of money ever.

I’d love to go to Sweden and Norway to see the Northern Lights. I’d love to go to Tokyo too!

Add £7,200 to my Emergency Fund.

Invest a lump sum of £15,000 in my S&S ISA.

Get a Declaration of Trust to protect my share of the property, in case we split, and then overpay £15,000 of the mortgage.

Dream holiday at £4,000 for DP and I.

Buy my dream handbag from Celine £3,000.

Wall ties (own a Victorian property) and re-decorating the bathroom. £5,000 in total.

Total - £49,200. Leaves £800 for some treats and to put towards new hardwood flooring in the lounge.

See you on The Puffer then!

I was thinking Norway and Sweden!

Enjoy!

https://crsc.org.uk/salute-to-stockholm/

Yes..if you're using it for pensions purposes it's better than a normal s&s isa as it gives you 25% govt bonus on whatever you put in it (to a max of 1k bonus per tax year)...but you can't withdraw it until 60yo (or terminally ill) without losing 25% of it (which works out a bit more than what you already put into it

I plan to use it as a bridge between 60yo and retirement age as you can't claim NHS pensions before national pensions age and think I'll be too burnt out to work full time as a Dr by whatever age we will be allowed to retire

(I put 4k a year in the s&s Lisa, 1k pa into normal s&s isa and 15k a year into a cash isa but that's mainly cos I'm remortgaging next year so want more available as cash). I'm lazy and use nutmeg for both s&s as you just tell it the level of risk you're willing to accept and it does all in the investing for you and the fees are pretty cheap

You're better off with 11k in s&s isa, 4k in s&a Lisa as that will get u 16k worth of s&s for the same price (providing you won't need to touch the 4k till 60yo

Honestly in your position I'd blow the lot. Life is to be lived and enjoyed.

Agree wholeheartedly with this.

use full isa allowance this tax year and next.
use remainder to top up emergency fund if you want any excess in a pension.

https://www.moneysavingexpert.com/savings/lifetime-isas/#retirement

That's a longer explanation
For most people it's often better financially to put their money directly into their pension via salary sacrifice etc ... i dont as if you pay more into the nhs it doesn't alter what you get back and it sounds like a complicated mess. But if youre using a normal s&s for isa anyway you're better off with this for the free govt money (obv labour may get rid of it)

All for the future, invested separately from partner.
Don't touch for now.

Possibly look into a cohabitation agreement specifically mentioning the money.

Work now, pretend it doesn't exist and let it grow to help you when older so you can relax a bit more

Thank you! I’ve been looking at a Declaration of Trust if I decide to overpay the mortgage, which will protect me in case we split