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!

@Ninkaninus the trouble with giving options based on what other people have done, is that they are meaningless without context, and yes we are crediting the OP with intelligence, so they've probably already thought of the obvious ones like pay off a chunk of mortgage, pay off credit card debt, have a holiday of a lifetime!

Its worth caveating with Seek RW Financial advice, just in case, right?

What ages are your children? I disagree with others - I would shorten the term of the mortgage so that you have more money when they are in their teens. And I would pay off the credit card, too, and put £5K more into savings, too.

You ask what we'd do. So in your shoes and with the basic info you've provided I would

Pay off credit card (reduces monthly outgoings)

Put aside a savings cushion (but based on an extremely frugal budget so not 6 months at current expenditure but 6 months at lowest possible expenditure - this links into point above and below)

Get financial advice about mortgage. See if possible to remortgage, whilst putting a chunk of money into the mortgage with the aim being to reduce both monthly payments and term. It is possible. Check for any fines etc. Use a mortgage broker.

Once you've saved money on your outgoings save that amount religiously

Depending on the chunk into the mortgage and the amount needed for a six month cushion. If any funds left I'd have a bit of family fun - however that looks for your family.

I wouldn't touch my mortgage.

I'd extend my house though. And see if it stretched to a holiday.

When we came in to a similar amount of money we invested 15k for the dc (they were babies then so this should hopefully be a good amount towards uni or similar by the time they get to it) and the rest went towards a deposit for a house move (so in your case I’d try to pay it off the mortgage, after paying cc debts). We also frittered probably 3k on a few nice bits & pieces just because we could.

We also came into a similar amount of money.

Cleared credit card debt, set aside couple of thousand in a ready access savings account as a buffer (has paid for things like root canal and bathroom repairs).

Put the remainder in to pay down the principal of the mortgage so that we will repay it quicker. We have a financial adviser and he is adamant that the best thing you can do is to pay down principal to reduce the term and reduce the compound interest you are paying.

Housing is not a good investment.

I had a similar amount inheritance and I gave adult children £2k each, helped my niece through uni as her Mum could not afford to help her £2k. After this I had £42k left. I invested in a btl with deposit of £39. I treated my family to a slap up meal out and put rest in bank. I did offer dh a gift but he said he did not want anything at the moment. 7 years on and I have over £74k equity in house now so a good investment. My sisters inherited too. One sister cleared debts, bought new car and went on expensive holiday with her family, another sister went on holiday, gave £2k to each child and put rest in bank. Other sister paid off very high debts on both her and her dh credit cards and had work completed on their house.

Just to add I also gained about £200 pcm after mortgage paid.

Justonesquare

Whatever you paid for the advice to pay the mortgage down was worth it tenfold.

Well done.

I would pay off unsecured debt and have a baby as I would be able to afford childcare when returning to work

Put enough aside to clear the credit card when the interest free period runs out. I'd actually consider putting it into premium bonds (I've got £10k in premium bonds, and most months I have a small win, it's produced a sum equivalent to 4.5% interest over the last year).

Put away an emergency fund equivalent to 3 months salary in case you ever need it.

Use the rest to pay down the mortgage and reduce the term. The interest saving will be significant over all. You may need to do it in chunks, eg 10% pa over several years. Put the mortgage money away in fixed term savings, so next year's 10% in a 1-year a/c, the following years 10% in a 2 year a/c and so on.

And keep back a couple of grand to treat yourselves - car, holiday, whatever.

And try and get more child support from the children's father - supporting them "largely on my own" is just not fair!

£5000 for fun.
£40 000 into the mortgage.

Pay off credit card, have a holiday, see a financial advisor.

Personally I would do up the kitchen and bathroom which are in dire need of it, as well as rip off our very over heated lean to room that I hate, and put an open air patio in its place. Then get the garden really tidied up and a bit re landscaped. Plus possibly replace the windows.

The rest (if there is any) would go into savings accounts for the dc.

Buy a couple of rental properties with buy to let mortgages. Depending on your current mortgage rate (if it’s low) don’t just put it into your mortgage

Pay off cc debts.
Treat me and kids to holiday
Give kids £1000 each for savings account and not to be spent until over 18.
Save £5000
Use the rest to reduce mortgage

Pay off credit card, leave aside cash for any upcoming expenses like a car or boiler. Set aside 6 months living expenses in case of future redundancy. Put the rest towards mortgage up to max allowed without an early repayment charge. Use the rest to reduce mortgage once the early repayment charge no longer applies.

If I’d take £1,000 for a treat.

Pay off the credit card.

Pay the rest off the mortgage.

AND save the amount of mortgage you will not be spending each month into your pension (which you don’t mention ) or an ISA

Or I’d have a fantastic holiday and a new car!

I would pay off the credit card debt and put enough away in savings so that I could live reasonably well for six months in case of unemployment etc. Bear in mind that with interest rates so low you will be slowly losing money on this sum, so don't be tempted to put too much away at 0.8% or whatever you can get.

Mortgage interest rates are at a historic low at the moment and wages/ salaries are beginning to rise so if you are managing your mortgage well enough I wouldn't tinker here.

I'd put £20,000 into a stocks and shares ISA with the intention of using that as a top-up to your pension or paying off your mortgage down the line. Your investment can go down as well as up but over the longer term you should do pretty well and the gains are tax free because it's an ISA. A company like Vanguard (recommended by Which?) offers a variety of choices. I have done well with them over the past five years but of course that doesn't mean they will go on delivering good returns and you must do your own research or take professional advice. With a bit of luck, the money you put into an ISA will earn you more than you might save by paying a chunk off your mortgage. And of course should you need to access the money in an emergency it's relatively simple to do so.

Only you will know what would be best for your family. Are your children at a stage where they would appreciate a holiday of a lifetime with you or would you rather, as pp have suggested, invest in life skills such as driving which will stand in good stead throughout their lives? I have always wished I'd learned to ski when I was young. Those people I know who learned early seem to really enjoy it for life.

I couldn't agree more with the pp who said that you will want to hug yourself for any pension provision/ savings when you get to 60. Although I'm not yet fully retired (I'm 61) I've been able to go part-time quite comfortably thanks to my sensible 20-something self who started paying in to a private pension more than 30 years ago. I wish I could thank that young me.

Have fun making your decisions.

Don't rush to pay off your mortgage yet. Rates are relatively low.

What is your pension situation?
What cash savings do you have (in terms of how many months' outgoings it would cover?)

If you have cash savings to cover you in the event of an emergency (the usual rule of thumb is 3-6 months worth of expenses) then you may get more benefit from putting a chunk of this in your pension than anything else.

Actually I forgot to put in my post, that you could also use it to buy an additional property. I would love to buy a rental property as an investment, but need £25K to buy a £100K flat here which would rent for £550 a month. Depending on prices in your area, you could buy a small rental if you could get a buy to let mortgage. I wouldn't spend any of that income though, but save it to cover tax bills, repairs and overpay that mortgage once a year.

As I said before though, you have to do what is right for you, as we would all do what is right for us individually. I said that I would buy a new car as mine is 12 years old and starting to need expensive work before long. I have had the car for 8 years. But if you don't need a new car then that's not something you would need to consider.

I would pay off debt first before putting money into savings. As for holidays etc. only you can decide.