To ask what you would do with 50k?

[PlanningAhead1]

Please do not see this as a gloaty thread at all as I promise it isn't meant to come across that way.
I'm from a pretty poor family, saved up and got married and bought a house 10yrs ago. Have 2 young DC. We don't struggle as such but we also say no to A LOT. We went abroad this time for the first time since 2019 and I feel amongst our friends we are seen as being tight (try to avoid rounds, feed our kids at home or take packed lunches etc).
Anyway, I am due to get just over £50k within the next few weeks. This is not inheritance and will not be taxed, but is in relation to something which happened to me a while back.
I know the temptation will be there to blow it. We need a new conservatory, I'd love invisalign braces, I'd love new built in wardrobes and to take the kids to florida. I know that this 50k Isn't a huge amount and will go quickly if I use it on the above.
It's got me thinking there must be better ways of spending it... I'm not sure if that's using it as a deposit to buy and rent out a house, set up a bouncy castle hire business, pay off a chunk of our 200k mortgage or our 20k car finance etc.
I have nobody to ask IRL as we aren't telling anyone about it but I want to make the best of it while i hVe the chance.
If you were to get 50k, what would you do with it?

If it were me I'd buy a really nice motorhome and rent it out. I know people who make a good £3k a month doing this. It would also allow us to travel whenever we wanted.

The thing with putting it on a holiday is that if your kids are young there's a lot of pressure to make sure this is the holiday of a lifetime, no-one ruins it or kicks off, etc - might be better putting it towards making daily life better?

Totally agree with all of this. Investing in property is your best bet.

put it down as a deposit on a BTL flat. Might not be making much on a monthly basis but keep it for 10-15 years and then sell it on. You could easily double or triple that investment….

But if you did this you'd need to consider whether you have the funds to fulfill all your landlord obligations (annual checks, insurances, fixing problems, decorating) and cover any void periods, and also whether you have the time and energy to manage the property (if not more fees to get that done for you)

If you were to get 50k, what would you do with it

I won't answer that question because my circumstances are very different to yours, so what's sensible for me is different to you.

In your circumstances, I would use the money to try and move from a position where you need to borrow for big purchases to one where you can do this out of savings, as then you earn interest instead of paying it, which makes a huge difference.

Unless your car finance is interest free or very low interest, pay it off. Then save the car payment at least so next time you need to buy a car you pay for it with savings. Also make sure you save for annual and irregular expenses like Christmas, insurance, car servicing/MOT, etc etc, before spending on non essentials like eating out or clothes for adults where you don't need them.

Maybe use some of the money for invisalign and the conservatory, but also aim to save some of it, so get one thing a year for the next few years and save at least a couple of hundred a month towards it.

If you haven't reviewed your finances, you will almost certainly be able to cut some costs and free up the money you need to save for these things, have a look at:

Do a money makeover and potentially save £1,000s - Money Saving Expert

Don't get fitted wardrobes, they're hugely expensive. Get Ikea Pax and pay a carpenter to cover the gaps with MDF/plasterboard if you can't do it yourself and paint it. Looks similar for a fraction of the cost. Google Ikea fitted wardrobe hack.

As for 'appearing tight' if you're not getting involved in rounds and taking packed lunches, you're doing the right thing. As long as you're not expecting others to sub you, you'll save a huge amount of money by not buying food at attractions where it's almost always overpriced, shit quality and at the end of a long queue.

I can’t believe people would suggest paying off a depreciating asset like a car. That’s dead money. The money will literally be worth less every day as the car value goes
down. You need to make an investment with it, something that adds value. Paying off a mortgage, increasing value of a home, adding to a pension, investing it or saving it in some form.

I’m a landlord, I rent out my former home. The tax implications mean it is absolutely not worth having a rental with a chunky mortgage at the moment. It is almost impossible to make any net profit if it is mortgaged and then you have to fund voids and maintenance. Landlords are selling up for a reason, it is only cost effective at the moment if you have no mortgage on it. I have 50% LTV on mine and only make £90
a month after tax and insurance and before maintenance and voids.

I’m reviewing at the end of this new 5 year mortgage term and will likely sell unless the market is very different. I’m seeing out this storm to see what a new parliament brings. Although I am not optimistic!

I would pay off all the "small debts" like credit cards, loans and car finance. If you have those of course. Then depending on how much is kept maybe pay 10k on the mortgage and spend some to make life more comfortable. Good luck.

Eh? The money and the 'asset' it purchased are completely separate. The car and the house could half or double in value and the debt remains the same.

If the interest rate on the car loan is 10% and they are 2 years into a 2% five year fixed rate mortgage then the best thing to do is pay off the most expensive debt as that's a guaranteed return on the money.

And cars aren't depreciating at the moment anyway. 2 years ago I paid £8k for a small 2 YO car. If I wanted to buy the same 2 YO small car today, it would cost me at least £10k. I could probably sell my car today for at least as much as I paid for it, so would have had 2 years usage for nothing.

That was for @AlltheFs btw

I’d build the extension I’ve always wanted and go on a Caribbean cruise.

In your position l’d be paying off debt first.

Hi @PlanningAhead1. That’s a great sum of money and hopefully provides you with some security. I can’t advise on whether to pay off mortgage etc - I think generally that’s a good idea to throw some at that, but depends on other factors. What I would say, as someone who has had plenty of money and then not very much and now has ‘enough,’ that 50k can very, very easily be frittered away. I wouldn’t do anything with the money for a while, except pop it int premium bonds while you think about it. People with money have more money, it’s that simple. Hold on to it as far as possible would by my advice, once it starts making its own money, then consider Invisalign etc. For now I would treat it as inaccessible.

@PlanningAhead1 for example if you do this, you’ll be left with nearly nothing.

Me, personally I'd pay off the mortgage (or at least put it in savings until the low fixed rate is up and then pay it all off). Simply because £50000 at 5.5%(future expected mortgage int rate) for 20 years will cost me £32k so by paying that off the mortgage I will save £32k over the term.

In your shoes, I'd pay off all interest bearing debt and stick the remaining in a 1 yr bond at 6% whilst you decide what to do with it. At £30k (after paying off car finance) you'd earn £1800 in a year which would go towards wardrobes or invisalign.

Premium bonds

Houses appreciate. Cars don’t (unless they are classics). They also break. No-one with any financial savvy would place cash into a car.

Wealthy people leverage cash to make it work for them, that’s what @PlanningAhead1 should be doing with it on a mini scale.

Improving a house is an investment. A pension is an investment, an investment portfolio are all options as are ordinary savings. But never a car.

I agree with PPs who said put it in a high-interest savings account while you plan what to do.

I'd also post this on the Money-Saving Expert forum too, there is some great advice on there.

I don't think the BTL is feasible as you would have to be able to cover repairs, running costs, insurance, tax and any period where it's empty.

It is worth looking to see what the car finance interest rate is and whether there are penalties for paying it off early. If the interest is higher than the interest rate you'd get from a savings account, it may be worth paying off.

If you have a fixed-rate mortgage, it's unlikely that you would be better paying it off than leaving the money in high-interest savings.

As you haven't said about your pension situation, it's hard to say whether a LISA is a good bet or not. But there are good tax benefits to that.

It's also highly recommended having three to six months costs in an easy-access account as a buffer in case of the unexpected with jobs etc. - if you don't have this yet (and realistically, how many of us do with the CoL), it could be your opportunity to get that security in place.

I too have come into some money a little more but not massively. We have set up ISAs and paid in the max as interest rates are currently great for savers. When they mature in a year we will look at the market at that point and potentially invest in a BTL property. Sounds boring but want to make sure we maximise the opportunity.

First - do you have an emergency fund of at least 3 months living expenses?
If not, open a high interest account and put that money away.

Second - do you have any known big expenses coming up eg washing machine is on its last legs / sibling getting married - put money aside for these.

Third - list all your non-mortgage debts in order of interest rates and pay off the high interest ones.

Fourth - pensions - do you have a pension if not set one up.

Split the remaining money 4 ways into
Investments - something low cost like tracker funds
Car finance / Mortgage
Stuff for house / self
Holidays

There is not enough info but

1. Pay off any high interest debts like credit cards
2. check interest rate on car loan it may or may not be worth paying off
3. do you have any emergency fund first goal is £1000 then 3-6 months essential living expenses if you need £1800 a month to live then you need £11,000 in a savings account paying decent interest but accessible
4. you must have a fairly new car so its unlikely to go wrong or need replacing any time soon what make a list of essential house repairs and cost them, them the nice to have additions and cost them
5. leave the list for 3-6 months to see if you still agree on what is a priority
6. how are you for pensions?
7. not everyone values the same things do you really want to go to Florida just because it is many people's dream is it really yours
8. what things would most make your life better long term could be simple like a good coffee maker or streamlined storage
9. initally think what would I do with just £500 as a gift
10. if you pay a chunk of mortgage make sure not to fritter the reduced payments but make a plan for that money maybe 50/50 savings and some lifestyle enhancements like a bit extra on food budget a bit more freedom with winter heating
11. Sometimes paying for courses that will mean you can up a grade or career change will reap the most benefits long term ie spending £3000 on a course that gives you a job rise of £5000 a year will pay for itself in a year after tax

Pay off the debts with the highest interest rates first. If mortgage interest rates are higher than savings interest rates then no point having more than necessary in savings. Then pay off some of your mortgage. But if you're on a low mortgage rate deal put the money into a high interest account - but you'll probably have to lock it away for a year to get the good rates.
Keep 5 grand to splurge and have a holiday next year that isn't Florida but is abroad. Get the braces if it's going to have a huge impact on your life - if it's just to make your teeth perfect then personally I wouldn't bother. You really don't need built in wardrobes and can you get the conservatory fixed rather than replaced?

Reduce debt

Invest in pension

A holiday

I feel amongst our friends we are seen as being tight (try to avoid rounds, feed our kids at home or take packed lunches etc

OP, if you buy your own drinks, that's fine

If you allow other people to buy your drinks but don't reciprocate that's really shabby

I can’t believe people would suggest paying off a depreciating asset like a car. That’s dead money. The money will literally be worth less every day as the car value goes

Nobody is suggesting putting money into a car. The car has already been bought - they’re suggesting paying off the loan. It feels unlikely that many investments are going to outperform the interest on the car finance, but it depends on the resettlement fees.

In your situation I would pay off the car and (depending on interest rates) pay the rest off the mortgage. If the mortgage interest rate is lower than you can get in an ISA then stick the rest in an ISA . Some are paying almost 6% atm.