To ask what you would do with £45K?

[fortunatelynot]

Due to bereavement I have inherited £45K. I am 39, have my own mortgage of about £110K which is due to end in about 16 years.
I earn a reasonable wage, have a bit saved, but not loads and 1k in premium bonds. I have one credit card debt of 4K which I have on interest free card for another two years. I have two teenage children whom I largely support financially on my own.

I know it is not a completely life changing amount of money but would be interested to know what any of you financial savvy people would do to maximise the benefits. Thank you!

Do the basic snowball -
pay off the highest debt first (card),
then whack as much as possible onto mortgage.

But the card is at 0% for 2 more years?
As the mortgage cannot be paid off completely (and mortgage is usually considered to be the only form of "good" debt), it makes sense to diversify your savings a little. An easily accessible cash sum equal to X months of living expenses is a good idea in case of redundancy or illness - return may be small in interest terms but in peace of mind and preventing the need to get into future debt it can be priceless. And with the opportunity to invest a sum in a longer-term savings option like a S&S ISA, by the time the mortgage is paid off you would have benefitted from 10 years or so of investment, so you WILL get a return.

Snowball is great if you are in a situation where you have a lot of unsecured debt, but not appropriate in all circumstances if you're talking long-term planning.

Bank it for stair casing on our house as we hardly own any of it. #1 on my list is reducing monthly expenses.

I wouldn’t bother paying off any of the debts. The credit card is interest free, and a mortgage is usually one of the cheapest forms of finance. I’d have a think to see how your life could be made easier by the money. Or perhaps put some of it into a pension, you can get tax relief on it which will increase it.

20k to reduce the mortgage term
15k locked away between the 2DC for university/car/kitting out a flat
10k left to spank on a couple of really good holidays.

Actually, my finances/family size/stage of life sound not dissimilar to yours. I don't have a CC though so in your position would clear this even though it's interest free right now.

I don’t know enough about debts, mortgages etc to be as useful as some others on this thread, but the question that comes to my mind is: what will be really useful to you over the next 5-10 years?

For instance, you say you have two teenaged children. Is there a possibility they’ll be moving out, starting uni/apprenticeship/work, in the not so distant future? I would think about how much you would like to have available to you for things like that, in the relatively near future, which you would otherwise potentially find harder to save for.

Once you have that figure/goal, I would then seek financial advice to determine the best way to use/invest your money (eg with paying off some mortgage etc) whilst being able to access or save that amount in the timeframe.

We would pay off all debts including cars and spend the rest on doing up the house.

Message Martin Lewis!

In your position I would pay off as much of your debt as possible (including the mortgage). This is likely to be the safest and most reliable way to improve your long term financial position. Even though the credit card is 0%, that will not last forever so better to pay it off.

Why would you not reduce the term-it’s a no brainier-why would you pay all the extra interest?

Absolutely right. They should rename "interest" as "financial cancer". Because that's what interest is, a cancer at the heart of your finances, slowly eating away at them and forcing you to work harder to battle it. Interest is a cancer and earning money is the chemo that's always fighting it. The more interest/cancer you have, the more money you have to earn (chemo) to keep it at bay.

As the credit card is interest free, put the £4K to clear it in a savings account and draw on it each month to make the minimum payments. Then clear it when the interest free offer expires and you'll have a few bob left over earned on your £4K savings.

Then pay as much as you can off the mortgage, but do not reduce your monthly payments. Keep them the same, or increase them if you can as you get a pay rise or similar.

Also you should definitely reduce the mortgage term. That’s the best way to reduce the interest you will pay.

The only caveat to my advice would be to divert funds into a pension, and get the tax relief. Get the govt paying you instead of you paying them.

Pay off credit card and the rest to mortgage to bring it down. Anything that helps you become mortgage free sooner, the better.

Is there anything you fancy doing for yourself? Any training or courses? Investing in yourself is always worthwhile.

You could put the max into the premium bonds while you decide. You never know!

Yes if you know you are able to resist further spending on the credit card then a savings account to pay the monthly payment is a good idea and will earn you a (small) amount back in interest.

Definitely pay off credit card
Nice holiday if you haven't had one for a while
Add to Premium Bonds - easy to get out if you need it, but you might win a nice prize!
Set some aside just for 'fun' money
If you are not desperate to reduce mortgage, I wouldn't, as you would not clear it, so in effect it would be 'lost' money

What's best for you depends on your mortgage interest rate - no point rushing to pay it off if there's penalties or the interest rate is like mine, where it's lower than instant access savings accounts.

But if you pay your mortgage down, you need to plan to save more to see the benefit, otherwise you'd have been better putting the money into savings and just carrying on with the mortgage as planned.

How secure is your job - unless it's absolutely bomb proof, with good sick pay, it's probably making sure you have a good chunk - at least £10-20k as savings just in case - also good to have a buffer for car replacement, new white goods, home repair or improvements etc.

Premium bonds are worth a consideration but the chance of getting more interest than an instant access savings account is quite low.

How do you currently manage day to day? For example, can you afford a nice holiday each year anyway? If so, I'd probably not rush to have an extra holiday, but it's a consideration to do something a bit bigger than usual.

I'd just leave the credit card as it is TBH, it's not costing you anything.

Might be worth putting some aside for DC university/driving lessons/house deposit but that's up to you.

How's your pension arrangements - do those need topping up?

Probably no point seeing an IFA for that amount, they'll only tell you what you already know and what people on here have said.

Oh mind you if I actually was deciding what to do with 45 grand then I definitely would earmark some of it toward a degree I want to take.

I would go and see an IFA and not take advice from unqualified strangers online who have no idea of the ins and outs of your situation or long terms goals.

Why are people obsessed with paying mortgages off?

The interest rate on my mortgage is 1.1% I get more interest by just leaving the money in my current account (1.5%). I also have regular savings products running that pay 3-5%. Makes no sense at all.

Yes of course it depends on how the rest of your finances are set up.

We’re mortgage free now and if we were to take out another one we would overpay monthly and also pay it down regularly no matter how favourable the interest rate was, simply because we do not want to be mortgage slaves and we both want to be in a position to stop working when and if we wish to, or circumstance dictates.

Why are people obsessed with paying mortgages off?

1. Because once I've paid mine off my available income each month will be massive.

1. Because I thought I had the most stable job in the world until I didn't and was unemployed. The mortgage is a fucking millstone and the sooner it is paid off the sooner I can retire/work part-time/do what the fuck I like

But in those circumstances, you'd just use the savings to pay the mortgage. You still have the money, and have made more interest than you've saved by overpaying the mortgage.

I pay off my mortgage because I am not the most disciplined saver.

I have overpaid my mortgage by nearly £30k over the last few year. If this had gone into a savings account t, I would have dipped into ot for holidays etc.

Bigger equity also gives you access to lower rates.

So Barbara do t be so dismissive of others Financial strategies, it’s rarely as straightforward as you have made out,

It’s more a psychological thing for us I admit (particularly for my OH).

Mortgages are a cheap debt spread over years which makes them expensive. Mines 2.68, we repay £1.40 for each £1 borrowed.

Not everyone’s on low 1% rates.