If you were given £20k

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if you were given £20k inheritance what would you do?

If you generally struggle in very hand to mouth existence, better off than many, I have no pension, we own a mortgaged house that isn’t really big enough, house also needs a fair bit of work done to it, DH has loan to pay for his car, I have student loan, my car is 13 years old.

Would you do up the house, move, or put aside to move? I’m worried DH will want to pay off his car loan to be debt free or just overpay mortgage, but I’m desperate to move so kids will have a bedroom each, and maybe even a second bathroom! I’m fed up with living on top of each other!

None payable up to £250k.

Hi OP,.I agree with you, I wouldn't move, sounds like you are living to your means currently with debt and no pension, so even with 20k cash injection can you afford a house move to a bigger house, what will 20k actually get you, taking into account fees and stamp duty? Also have to take into account increased bills and maintenance costs on a larger property.

I would clear the debts rather than save ii immediately as you are paying interest I assume on it. Then utilise the money you would pay out in debt to overpay your mortgage . That way when mortgage rates settle and you want to remortage for next move you will have much less of a mortgage to port/pay off.

Are you also employed? If so enrol in your employer's pension scheme ASAP.

And take a little chunk of it to yourselves to a something nice.

If you gave debts whichever cost the most eg higher interest rate and then use those payments to either pay down other non low interest debts or save for either repairs or potential house move.

Unless you have a pressing house repair - eg something which will materially damage the property further eg leaky roof or damp or cost more in heating eg drafty windows.

How much is the car loan ? What’s the interest ?

20k in the situation you describe? I would porbably use a couple of grand for nice stuff and put the rest in savings or pensions. It's not enough to move it sounds like.

And pay off debts of course. That should be the priority (unless you have some very good 0% interest deal still).

My advice would be:
Answer these questions.

1. list all the loans you have, their amount and their interest rates
2. are you married and does your partner have a pension?
3. do your kids need or even want different bedrooms at the moment?

Then

• you do not 'need' a fancy car, you just maybe need a car that works
• your student loan is cancelled 30 years after you graduate even if you haven't paid it off, and you only pay it off if you are earning over a threshold. Tbh i would ignore student loan. Let it be a salary tax.
• realistically how much do you need to move house?
• realistically how much do you need to make your own home somewhere that is sufficient ie add an extra bathroom if you have only one?

Once you know those details.
You can make a better informated decision.
Personally I'd invest it, in index funds within an stocks and shares isa, and leave it alone for a bit. But also put some in a savings account.
You will need a pension in your future.
Consider selling your fancy car. And start figuring out how to spend on what you need rather than want. £20k is not a lot when it comes to moving. Maybe you can afford to convert a room where you live.
Or maybe you can move anyway without using the inheritance money.
Just because you have some spare money doesn't mean you should spend it. It would be wisest to save it for emergency fund and invest for your future.

In my view, it's a waste to pay off car loan, as you will be fine to 'leverage' that debt, by paying it in installments and paying it off now vs installments is not going to solve your problems.

Your problems seem to be:

• you have no pension
• you are unhappy/stressed by your living arrangements
• not sure about your savings
• you want your inheritance to mean something to you

If you put money into car loan, you are throwing money at a decreasing asset.
And then will not have any money left over.
If you put money into house renovation, you will increase value of your house, potentially solve your house suitability problem.
But then also be able to sell your house when the time comes for probably more and probably easier. You could refinance mortgage at the point and gain more equity.
Depending on your mortgage rate, I would definitely be tempted to stay put.

Although I see people writing about their partner as a team, at the same time, I think its unfair he has a needlessly expensive car and expects that to then be financed at the expense of the wellbeing of the family. Ie causing poorer living standards and lack of preparation for retirement.

Ego is not important, no one needs a car over £20000 unless I guess they have requirements for a technical vehicle e.g off road for farming.

Look after your wellbeing and your families wellbeing and security. So savings will help incase you run into hardship. Pension is important.
Maybe you can get a bathroom added in. Not sure that's all doable for £20k but you can save too.
Good luck

I think you need to be sensible first, you have no pension and no savings and some debt.
you need to list everything that could be done and then prioritise
firstly you need some savings for emergencies i would say about 3 months living expenses plus enough for a replacement very basic car total 5k at least in high interest savings account. you can get about 5% cash ISA's are of no benefit unless you have a lot of savings as no one pays interest on the first £1000 interest per year you would need more than 20 K in savings to be paying tax on savings interest
list repairs to current house that are essential, check the interest rate on the car loan if it is similar to current interest rates maybe no advantage paying off quicker same with student loans however if car loan rate is 15% then definitely you would be better off paying it down but check there are no penalties for early repayment
living pay cheque to pay cheque is no fun so would seriously consider using this time and money to set aside money for known events not only christmas and birthdays but things like new brake pads and tyres for cars repairs etc

and develope a new budget so you are living within your means without your inheritance drip feeding daily living. it is fine to make a conscious decision to use some to buy this or that or to fund house move bigger deposit etc but don't let it fritter away

If I was given £20k I’d pay mine and my partners debt off, anything I’m given we share and he does for me, it would ease our money woes monthly and free up cash so we could save up.

I'd spend 5k on debts, put 5k into savings for a house and 10k into a pension to give you a little peace of mind and jump start.

£20,000 in a 5% fixed savings acc/ISA for 1 year is about £1000 interest.
So I’d stick it in savings until the mortgage is due for renewal, then review options.

** would like to add
Not all debts are bad.
If your debt interest is less than the interest you would get from having money in a savings account then actually makes sense to have money in savings account.
Also if debt is payable over years, then inflation is probably higher than interest rate.

The size of debt makes a difference though, as for a mortgage, the interest you end up paying for a large loan like 200k even at a small interest rate, is huge and compounds.
So repayments on mortgage would be wise.

But repayments on car loan not wise. As the interest is not compounding I imagine as I think car loans usually calculate repayments at the beginning with a set interest rate and payments have that taken into account.

Whereas your mortgage you could be saving yourself years of mortgage free life.

You need to weight up
Do you have an emergency fund
You definitely want a pension
VS getting rid of debt from mortgage (probably very wise as the interest rate will go up if you haven't refinanced in a while)

With the mortgage you will save yourself money in the long run.

With the emergency fund it's useful because then you don't need loans or credit card to cover emergency costs like new over ect.

With pension, longer you leave money in stocks and shares, longer it has to compound, so sooner is Much better.

If you have S&s Isa then you don't pay tax when you draw money from it.

...
So make overpayments on your mortgage,
Save some as emergency fund
Invest some for your pension,
See if you can get a bathroom built,
Buy something to remember you mum something sentimental maybe. Like a little trip.

I didn't pay any stamp duty. I can't speak for the OP.

in what way is the house not big enough? Could you make a garden room with the money? Or is it bedroom space you lack?

personally £20k wouldn’t be enough for me to move as most of it would go on stamp duty.

id try save at least £5k for a rainy day though unless you already have some savings.

then the rest I’d do home improvements even proper understairs storage makes a big difference.

Do you need 2 cars? If so, put some money into savings for your eventual new car, so you don’t go into more debt. (£5K?)

Put at least £7K to a pension if you truly have none at all. Is your employer paying into one for you now or are you self employed? This is a ‘boring’ use of money but the earlier you pay in the more valuable the money is later - £7K will work harder for you now than the same amount in 10 years time.

Then decide if you should pay off the other car loan so that your monthly outgoings are lower and you can then put that money into savings each month. This depends on how you organise your finances, I suppose, but if you’re married generally it’s better to work as a team as you’ll get richer quicker!

Otherwise put at least £5K into ‘if the shit hits the fan and if it doesn’t it can go towards a bigger house’ fund, and spend the rest on doing things up in your current house so you’re not fed up and have something to ‘see’ for your inheritance.

If you're already struggling with a hand to mouth existence as you say, then it would not be sensible to use a one-off windfall to move to a bigger house. Much of the £20k would be swallowed by moving costs (legal fees, estate agents, removals) leaving only a limited amount to cover any actual increase in the value of property you could afford.

After all that, even if you managed to get a bigger place, you would be left with the same income you had previously but higher living costs (e.g., higher council tax band, higher energy costs). If you were struggling before then things could only be worse. You'd still have no pension, be vulnerable to unexpected expenses, etc.

By all means spend a modest amount on improvements to your existing home (especially anything which will reduce running costs). But please also keep some in savings to help your family to weather any storms the next few years throw at you.

When your putting money away in savings account,
Remember it's devaluing over time.
As the interest rate is less than the inflation rate.
So if you do inflation rate - interest rate, then that's the rate at which it's devaluing.

So investing can be better as you usually get better returns over time.

When people are saying you get the interest for 20k at 4%.
If you don't leave that in the account, your effectively devaluing the money at the rate of inflation which I'm not upto date on but was at like 10% is or something.

So it is better to put that in places where you make a return thats higher than inflation. Ie house repairs.

Or in mortgage repayments because the mortgage loan is compounding (ie 5% on 200k is 10k added per year, then the year after you're paying interest on 210k - what you paid back that year) so getting mortgage down is really wise.

Paying off the car loan doesnt seem like a great move because if you invest the money in stocks or maybe in your house renno, you would get a higher rate of return than the interest rate on the car loan.

Also. You would not loose the car if you don't pay it all off now.
But if you don't invest or make house changes, because you've paid off the car loan, but then have to save up to make house changes it doesn't make sense.

You need to evaluate the loans you have and if they are working to your advantage or disadvantage.

I don't think £20k is enough to move to a bigger house. I would probably buy a motor home and rent it out. I know people who make £100-£150 a day doing this.

No way should you pay off his car loan with your inheritance!

YANBU to want to move, but can you REALLY afford it? What about stamp duty, solicitors fees, moving costs, etc? £20k really doesn't go very far when you factor all that in. Plus, you're going to add to your debt burden if you have a bigger mortgage in future. Can you afford that in addition to all your other debts? TBH, there is a lot of sense in paying down the debts you have, rather than adding to them, and I'm worried this move will add to them.

I guess it depends how you run your finances. We don't have 'his car and my car' in terms of finances. We have two cars; I tend to use one and he uses the other, not always but mostly, and they are just a joint expense. So in our case a car loan would be ours.

If you've just received this inheritance then I would do nothing with it for a few months. Open a Tandem instant access saver and put it in there so you are getting 5% interest on it. And use that time to clarify your thoughts. Inheritance money can come with a lot of emotions so it's good to not rush anything.

I don't think that £20k isn't enough to make any significant long-term change to your life. I wouldn't move house. Most of that £20k will disappear on estate agent fees, solicitor's fees, stamp duty (unless you're in an area where property prices are low) and a removal company. It cost me £8,000+ to sell a house and move everything out not so long ago.

I'm someone who really needs to feel I've got a safety cushion to fall back on: I worry a lot if I don't. So I'd put all £20k into Premium Bonds, where you should expect to earn about 5% a year tax free, and use any winnings to make life less hand-to-mouth. If there are courses or training I could take to improve my chance of getting better-paid work I might invest in that. £20k wouldn't get me out of the hole I'm in, but I might be able to work my way out. Good luck.

If you've been struggling and claimed universal credit will £20k affect it? Otherwise I'd probably move if you want to and can. I'm in a cheap area too and can see how this money would make the difference where it wouldn't in say the south east.

As PP have said, £20k doesn't stretch that far in terms of upsizing. Would you be able to cover any increased mortgage payments, even if the amount you can borrow would increase?

My inclination would be to pay off any debts, keep some in an emergency fund so you don't have to go into debt to deal with an emergency, and throw the rest at the mortgage, and then go forensically through your finances and come up with a 3/5-year plan to help you achieve your goals.

Pay off all of your debts, and don’t get into any more debt.