What would you do with £50000 inheritance?

[Bellavinci]

What would you do with £50000 inheritance?
My husband will inherit £50000 next year and we are trying to decide how best to invest it and not let it fritter away.

We are both 40 years old and not property owners (we currently rent a house that my mum owns).
We have two children aged 2.5yrs and 6 months and don't plan on having anymore.
My husband is just starting a new job with Royal mail and I currently work for a University (part-time since having kids) but am on maternity leave. I have just finished upskilling and qualified as a Personal trainer, Nutritional Therapist and pre/postnatal exercise specialist. I plan to start a self-employed business in this field within the next 6 months (alongside my paid PT job if we stay in the City).

We live hand-to-mouth at the moment and have £20000 of debt. With our current debt, low salaries and bad credit ratings we would find it hard to get a good mortgage rate and cannot afford a property in our current city where friends and my mum are based unless we increase our income. We are open to the idea of relocating, if it means we can afford to buy a property and have family in Bath, Bristol and Corby.

My mum owns two properties and has mentioned selling one to release early inheritance for me and my siblings, which would add to our cash pot but that is not a definite yet.

What should we do with the money to best improve our current situation and future prospects?
We don't trust ourselves to just sit on the money and save it as it would likely get sucked up into monthly living so we want to invest it as soon as possible.

Should we:

1. Clear debt first then try and get a mortgage using the rest as a deposit?
2. Use it all towards a mortgage (relocating to a more affordable area as soon as we can).
3. Purchase a property outright (in a more affordable part of the country) and rent it out in the hope of gaining a small income.
4. Clear debt then purchase a holiday home (chalet/lodge) and rent it out in the hope of gaining a small income.

If the latter two options would work then we would hopefully save the income towards a mortgage (option 4) or pay off the debt sooner (option 3).

Any advice or suggestions would be much appreciated. Thank you in advance.

Yup. Pay off your debt, and chuck the rest somewhere safe.

Use the extra income you are not spending servicing your debt on making your finances look shiny and fresh, so that when the picture is clearer regarding your mum's finances, you can make easier decisions.

Definitely clear your debts, it’d be daft not to. And then maybe save the rest towards a house deposit?

You definitely need to clear the debt, the cost of servicing it will be higher than any returns you may get on investment and it will make it unlikely for you to get a mortgage.

How have you got into £20k of debt? You definitely need to look at how you manage your finances before starting a business, I'd spend a small amount seeing an independent financial advisor and getting professional advice on the business idea. As you rent from family buying a house isn't a massive priority, making yourselves a bit more bullet proof financially is. Keep six months of expenses in a hard to access account, have sinking funds for replacing white goods (if you have to?) and your car and then look at what is left.

Option 1
Clear debt and do whatever you can to get on the property ladder

Pay off the debt.

Apart from £2k for emergencies, put the rest in at least a 1 year locked in savings account or a 90 day notice account or something.

Draw up an actual budget and start living within your means and saving.

Do not buy a flat to rent out. do not subsidise business dreams.

What everyone else says!
Clear debt as an absolute priority.
Put the rest where you can't get it and save it towards the mortgage - it'll take a while to decide where you want to be/suss out the best location if you are thinking it might be staying put or new location (maybe allow yourself a few k as seed money for the business - but don't get carried away and sink much - esp if you might move locations as obviously the clients won't come with you!)
DO NOT buy a rental property - lots of work and the income isn't guaranteed unless you know what you are doing. Having your own pad is so much more important imo. (we have a part share in a holiday home. It's a faff and NOT a huge earner, although I concede we absolutely don't put enough time and energy into it. If you are starting up a business do you really have enough time to devote to that too? I really doubt it.

Clear debt and save for retirement.

Clear the debt.

£30,000 left.

Do you know how - exactly how - you got into £20K's worth of debt, and have you locked down all your budgeting and spending so that you won't be there again? (Your comment that it "might get sucked into monthly living" is a bit ominous.)

If you haven't done this yet, please please do it before you come into the inheritance. You Need A Budget (YNAB) is good software for this if you put in the initial effort to learn it. Tracking everything you spend (not just monthly, but irregular amounts that come up annually or once in a while) will give you a really good idea of exactly what you can and cannot afford.

Would your DM consider selling you part of the house you live in for £30,000? That would probably be the safest place you could put it, tbh.

Please don't buy holiday rentals or anything else. Way way too much work unless you are super organised and really understand about yields etc.

Clear debts first.

Only buy a holiday home once you are extremely stable financially. We sold ours as it was costing so much and that was without a mortgage. Guests aren't always respectful of your property and if you are unlucky some will purposefully damage it. This on top of the normal maintenance and wear and tear will mount up costs and you need to be able to afford these. We decided the stress just wasn't worth it just so we could have a few nice holidays in our own holiday home. It's not really something you do for an income.

Clear debt, put left over inheritance into a savings account you can't instantly access. Preferably in a different bank so you can't see the money every time you log onto online banking.

Direct debit of whatever you're paying towards debt at the moment into savings account.

If that leaves you with enough deposit and income to cover a mortgage, buy a house. If not, take independent advice.