Wwyd if you came into large sum of money

[sulasuka]

NC for this.

We are in the next year or so about to come into a large sum of money. About £400,000.

I am feeling completely out of my depth about this. I know we probably need a financial advisor, but just wondering what other people would do in this situation.

We have a small mortgage left of less than £40,000. On a tracker so probably would pay that off as obvs interest rates can only go up. House probably worth just over £400k.

We also have 2 separate loans which we are are repaying. One was for an extension which was £30,000. We have half left and due to repay in 2-3 years. Another is a car loan which re repay about £500 pcm.

I also have my student loan from years ago- about £8000 left and I pay just over £200 pcm for that.

My first thought is to pay off all debts. Would it be best to include student loan in this??

Then no idea what to do with the rest of the money. We sometimes think about moving but to get a nicer house than ours in a suitable area close to dc school would be a lot of money- around 600-700k which is silly and would cost a lot to run.

I’ve always worked FT and am now in a very demanding job, and whilst the joint of having more time and a better balance appeals to me, I think I also enjoy the level of control that my senior position gives me and atm am loathe to give that up. I do fantasise about doing more studying tho. Obviously I couldn’t give up work altogether.

My other thoughts are saving for dc for uni fees, a holiday cottage. A dog? DH would probably love a camper van.

Wwyd? Feel like I’m out of my depth as I said.

I'd definitely pay off the loans (student loan depends on which tranche and interest, but personally I'd probably clear it).

Look at your pension provision, and consider a lump sum plus increased monthly contributions from monthly cash freed up from clearing the loans.

I'd look to be enjoying some of it - in whatever way works for you, so some special holidays or a monthly long weekend / city break, something you've always wanted but has felt too extravagant.

Then I'd want the rest of it (maybe half based on your loans and a decent lump sum into pensions) invested in some way - that depends on your personal risk profile.

Ooh, pay off all debts and book a holiday.
My mum, auntie and Step-dad have all bought lots of premium bonds. They seem like a good place to save money, at least 2 of them win money each month, Aunty got £50 last month and step dad £500.
I would buy something really extravagant too, Rolex watch for me

I’d probably set aside a bit of it for blowing on indulgent lifestyle stuff - eg getting a dog or putting money towards a camper van.

However, I’d be sensible with the rest: pension top ups, ISAs, planning to fund children’s uni/first flat deposits, paying debt off etc.

Neither DH or I have been gifted or inherited anything but when we have a bit of a downfall (eg bonus), we blow 10% and invest 90% of the sum.

Echo what Chasingsquirrels said. Pensions probably most tax efficient way to invest if you've cleared loans and don't need the money in short to med term. Plus pension means you can leave what's left to kids without IHT implications (if your estate is over threshold).

I inherited 120k last year. I paid off debts, a chunk of mortgage, invested in pension, booked a luxury holiday and a car. The rest is in ISAs and savings accounts.
It’s a nice ‘problem’ to have.

Pay yourself first as the saying goes. Not counting the car, your debts are at £78,000. Estimating another £15,000 for the car debt, that would bring you to about £93,000.

I would put £300,000 away immediately in a mix of long term, medium term and short term savings.

Long term = pensions, stocks, kids' education funds, etc. Could be £225,000
Medium term = money that takes a bit longer to liquidate but is there in case you need it. £50,000
Short term = somewhat easily accessible emergency fund money in case a roof need fixing, etc. This can also be for vacation savings. Maybe £25,000

Then pay off the £90,000 - £93,000 of debt and use the remaining £7,000 – £10,000 as a way to treat yourself in some way. That'll make you feel like you've "enjoyed" the money but most of it has been stashed safely away from you going through it like water.

Congratulations! I'm envious. :)

Oh wow! What a problem to have OP. I’m not jealous but I’m very envious. Watching with interest to see what you do.

I hope this money is life changing for you and your family. As well as doing all the adult stuff like paying off all your debts, make sure you get to enjoy it too. Don’t be scared to treat yourself!

Thank you for suggestions and well wishes. I do very much appreciate that it’s a v good problem to have!

Some v sensible suggestions here.

This has happened to us recently although about half the amount that you will receive. We paid off the rest of the mortgage which was around £40k and bought a second hand car for 5k and needed a new boiler etc. We are planning to do up our house which is woefully in need of modernisation and new carpets/ windows etc. Everything we've ever had furniture wise is second hand so it will be nice to gradually get new stuff.
I am currently juggling 2 jobs amounting to full time and it's a struggle so I am currently looking at job options to try to reduce my hours a little even if it means taking a lower paid job. Having some money means more options which is nice.
The rest will be invested to help 4 kids through Uni.

How about some help in the house? A cleaner perhaps?

My parents have a large amount invested in a prudential fund that is only available through a financial advisor. It grows at approximately 7%, but you are able to withdraw 5% either in an annual lump sum or in monthly installments, so you can benefit without actually touching the capital. I would be planning to pay off debts and invest the rest in a fund like that one.

I'm with jings, clear debt, separate the majority into different investment funds and splurge a bit with about 10k. Although do check for any penalties in clearing the mortgage, it maybe better to separate that 40k out into a different account and pay the mortgage from that. At least that way you can accrue some interest and still have the security that the mortgage is covered.

Not servicing your current debt will make a huge difference to your current financial situation and you will feel much better off.

My first thought is to pay off all debts. Would it be best to include student loan in this??

Of course, why wouldn't you?

Pay off debts, put the rest into a bank account and stop panicking. Give yourself time to mull it over. Get some proper advice if needed.

I don’t know just sometimes you hear different advice about student loans. It would be nice to have the extra £200 pcm tho! We already have a cleaner!

It would be good to go over numbers with an IFA. Student loans are a rip off unless you earn so little that they get written off.

Our first inheritance we paid a big chunk off our mortgage and moved into the bigger home we're in now.
We also used some for a few nice trips abroad.
When we inherited again a few years ago we bought a holiday cottage. It is used every weekend and lots in the week by us and family. We didn't want it sitting empty and the village is very lively so we use all the facilities year round.
We could have paid off the mortgage but since it was already affordable decided to buy the cottage. The cottage has risen in value at least 50%.
A large amount of money I would definitely put mainly in property.
Then save some back for a Cartier tank watch, good holiday every year for the next 5+ years, some premium bonds and a VW camper van.

I don’t know just sometimes you hear different advice about student loans.

If you went to uni surely you know that the idea is that you pay it back when you have enough money to pay it back?

IFA can also help with splitting up the money so you are covered by government guarantees if your bank gets into difficulty

Yes @AlternativeTentacle I do know that and I have been paying it off for the last 10 years. However, a previous poster has commented that her mortgage was affordable so they didn’t pay it off but decided to continue repaying and used the money for something else. No need for the snarky tone.

Hmm regarding student loans I'm not sure. Normally the advice is to not pay it off in one go. However as you are going to be receiving such a huge sum of money, I'm sure the student loan is very small in comparison and would be better to just 'get rid of it'.

If it were a 50k inheritance for example, I would definitely not use it to pay of student loan. A student loan isn't like any other loan. V low interest and it's salary dependant- so if you do decide to give up work, you wouldn't be required to make any monthly re-payments while you are not earning over the threshold.

However, a previous poster has commented that her mortgage was affordable so they didn’t pay it off but decided to continue repaying and used the money for something else. No need for the snarky tone

That doesnt make her right. A student loan is salary dependent because it allows you to pay it back when you have the income. if the income comes from elsewhere why on earth wouldn't you pay it back? It is not snarky to point this out. What is wrong with people? The money from student loans comes from the government not the banks, and if you can afford to pay it back then you should, so that money can be used for people who need it.

But I will pay it back either way eventually? 🤔

Don't. underestimate the bliss of being debt free. Yes it's "only" a student loan but get rid of it, you can afford to.

Then you have a lovely debt free blank slate. Personally I would buy a camper van over a holiday home. Cheaper and less upkeep. And more options with regards to location, obviously.

I would also put aside £1000 for both you and your DH each, to splurge on something you've always wanted, no judgement. So a bag or a watch or a painting etc. A luxury you would never justify otherwise.

What a lovely problem to have !

If it was me I would pay off debt and mortgage including student loan and buy a house to rent out as investment in my children’s future.

But I will pay it back either way eventually? 🤔

What is puzzling you exactly? Student loans are for those who can't afford to go to uni, and are paid back over time when the person can afford them. You can afford to pay it back so that it can go back to the gvt to help more people go to uni. Why would you even want to hang on, when you are getting an inheritance and don't need to pay it back over a long period?

It very simple.