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!

£45K....

If t were me, I'd spend £10K on a car, £10K on holidays, £10K on wild parties, £10K on eating out at nice restaurants, and with the last £5K, I'd probably just fritter it away on stupid stuff.

Similar to some PP.

Pay off credit card/any other debts.
Put 5k side for savings/rainy day fund.
Over pay the rest of my mortgage reducing the term and interest I'd pay overall.

Then from the free money from a smaller mortgage I'd have available every month, I'd save half of it and then use the other half to save and pay for holidays, home improvements, cars etc.

Pay off the credit card
Put 6k in premium bonds
Pay down the mortgage with the rest

Is my advice

What people actually do
Buy a new car and go on holiday
This is psychological, it’s free money hence instant gratification

What would I do.
I have no credit card debt and no mortgage.
I would buy a FTSE tracker with £40k and trade the pound vs the dollar with £5k

Thank you so much for all of the time you have spent replying. It has really given me food for thought and I have found a mortgage calculator to see how, even paying say £20K off the mortgage can knock years off it.

@Lifecraft : your ideas are very appealing but unfortunately I am a boring, financially sensible person at heart!!

How many years would it knock off, OP?

Pay off debts
Buy a car
Go on holiday
Have driving lessons
Have German lessons

But we don't have a mortgage. I suppose if it would enable us to get one, as a deposit, that might be something we'd do instead.

Op, can you make small regular overpayments to the mortgage?.

Buy my ex husband out

I would like to say extension/conservatory and a new kitchen but not sure 45k would cover it

Reduce the term of the mortgage, not the monthly repayments. You'd save so much in interest!

Put some in a SIPP or whatever you have set up pension-wise. You could start pension accounts for the kids, that would be super helpful for them in the long term and would ensure they can't fritter it away if that's a possibility for them!

I don't think a two-year restriction on how much you can pay off the mortgage is enough to warrant a different plan, just pay off what you can as soon as possible, keeping the balance in a high-interest account for two years until you can move it into the mortgage.

Due to ill health, my choices have changed from what they would have been last year.

10,000 off my mortgage.
4,000 debt.
3,000 set aside for a family holiday.
5,000 in my short term saving account.
4,000 for my children to have a bit of fun.
All the rest in long term savings.

We could manage on one income if we did this and still enjoy life and save each month.

We’ve got some work that needs doing on the house so we’d do that. Then it would either be an extension, or a big chunk off the mortgage - we have a nice mortgage advisor who we trust so we’d probably speak to him and to our financial advisor to see what would be best.

As your pension is already on-track, I repeat my second suggestion: give yourself a higher monthly disposable income by paying off the mortgage over the next two years. Thereafter the monthly decisions you make about what to do with the extra income for decades afterwards will extract more value from the money than any big decisions you make now. (If you want you can use the extra disposable income to save for big items, but you will be carefully weighing that against other smaller things you may want at the time, you can't anticipate and properly weigh all those alternatives if you commit the money now.)

Definitely get rid of your debt first and foremost!
And plan something lovely for you whether it's a holiday or something else.
Contact your mortgage co and see what your options are.
We got a similar amount last year and were told we could either reduce the term or the monthly amount but not both. We went for term.

what are your pension provisions?

I'd split between child savings, mortgage overpayment but mostly to pension

I’d pay off the debt first, then have a family holiday, then invest the rest in a separate property. Could use it as a deposit for a little buy to let property which would provide you with a second income that you could use to make overpayments on your current mortgage, boost your savings, or just enjoy.

If it were me, I’d put 10k into a savings account I have for my son, 15k off the mortgage, 5k on a holiday, and the other 15k into savings. Some of this would be put towards home improvements.

1. Pay off credit card.
2. Maximise my ISA investments including kids ISA's.
3. Invest £10k in index tracking fund.
4. Save the rest.

I know its boring but investing in an index tracking fund over a long period can have a massive return even during economic ups and downs. The power of compound interest is amazing, something I wish I was told about when I was a in my teens.

I'd pay the 4k off the credit card.
I'd then pay 20k off the mortgage to make monthly repayments smaller and hopefully cut the term down a bit.
I'd spend 10k on a dream holiday to Florida with the kids.
I'd put about 2k for each of the kids in a savings account to help them out for learning to drive, furnishing their own home etc in future.
I'd put the remaining 7k into savings for some 'rainy day' money, or use the money to update any bits of the house that needed it.

Loads of people saying "pay off credit card". Have they missed the bit where the OP says it's interest free for the next 2 yrs???

Do not pay off the credit card. Put the £4K you owe on it in a savings account, and draw out of it every month to make the minimum card payments. Then clear the balance when the interest free period expires. And the interest you've made on that account in the meantime is profit.

That sounds great, Lifecraft, but I know personally I would not be disciplined enough to do that and would muck it up somehow :o

So sorry for your loss OP
Nothing new to add but I'd pay off the credit card, seek mortgage advice re: paying in the optimum amount to reduce the term/monthly payment amount, assess my pension situation ans go from there.

Realistically I would also consider a small amount spent on the family or DC- but wouldn't go mad or even set a precedent by telling them I had it. These things really do depend on your specific needs and circumstances though I think. Give yourself time to think it over OP and don't waste it is my only advice. That amount is 'life changing' for an adult lot of people, some will never get the safety net of any inheritance.

Attic conversion.