What to do with £100k

[Unexpectedmoney]

Hi mumsnet. Have name changed. Dh has unexpectedly inherited more than £100k. Background of slowly clearing debts for more than 10yrs, we were down to the final £6k. This is a big shock. We never expected to be in this position. There are a few definite dos. We need a new car before ours 13yo one dies. We need new glazing in the window frames at its perma fog. And new carpets. We have 2 dc's age 3 & 6. We want to put them aside a decent chunk each, towards uni or have a house deposit (they are 3 & 6yo). This is something we never had. We don't want to stay in this house forever but plan to see out primary school. We could do up our house to the tune of £20k. Or go for it more for £40k. It's enough money to clear 3/4 of the mortgage if we choose. What would other people do, in this position? And anything we choose to save, how do we actually do that? Bonds? Savings accounts? Have never had any money before! To be honest I feel funny about being in this position hence asking on an anonymous forum. Will of course get some financial advice too but need to have my own thoughts straight first.

£600pcm mortgage
Bills must be another what £200 pcm - internet £20, mobiles X2 £20, gas and electric £60 minimum ?, Council tax £100 minimum, water £20 minimum, and then annualised house insurance - realistically this will be more like £250-£300 (so £900 running total) - and that excludes anything like netflix etc.

Running a car - insurance must be £200 a year, car tax often £100-£150, MOT and service - another £200-£250 minimum - there's no way this is less than £600 a year, I usually count mine as £1200 for safety. (Running total say £1000)

Petrol - £50 a month minimum presumably for petrol? Lots of people will spend £50 a week if they have a commute. (RT £1050)

Food - not likely to be less than £50 a week with a family surely? (RT £1250?)

That ignores anything like: season tickets, gym membership, haircuts, presents, clothes, children's clubs, annual things like Christmas which need to be divided by twelve and saved for monthly, any childcare costs you might have during a notice period, anything like professional membership fees if you have to pay them (mine are £400 a year so an extra £30 a month), the cost of saving up for a new phone over time or the additional cost of a contract which includes a phone, the cost of saving up for your next new car, anything like a more expensive internet connection, netflix subscriptions etc. You might not have any of these, but if you do have them they might not all be able to be cancelled with no notice so you have to account for the cost.

I can live pretty frugally and I budget £1,200pm as my minimum.

But that's "running costs", if you were out of work. That's only one thing your fund is for. It's also for when your boiler fails and costs £4k to fix, or your car breaks down, or your roof falls in. My shed is falling apart and it's going to be a couple of k to replace it, for example. It helps you sleep at night, knowing you have the ability to react to problems (some might be covered by insurance but it's nice to know you can get straight whole waiting for payments).

I'm pretty risk averse so I like a nice healthy emergency fund. I'm especially cautious with Covid, and Brexit, we have so little chance of predicting how things will go. I suppose because I'm single and only have one income it adds an extra worry, once I'm out of work all income stops, not half.

Also, I tend to say 6m income though, rather than 6m outgoings.

You can also call it your holiday fund if you want and mentally set aside two or three k to next year's holiday. Years ago I used to divi up all my income - short term savings, long term savings, holiday fund, car repair find, car replacement savings, Christmas gifts etc - literally in different accounts. I don't bother now, I put it all together but have a mental tally of what I could spend on each.

I've opened my spreadsheet and yes it does add up to close to £2k outgoings, and that's without some of the stuff in the last para such as birthdays etc. So yes £12k benchmark makes sense.

That sounds sensible to me then, it's scary how much life costs!

I probably wouldn't pay off the mortgage if you're planning to move again in 5 years or so. I'd pay off the debt, buy a car and do the work on the house then put the rest into the best savings account you can find and give yourself time to think about it. You might want to think about whether it makes sense to move sooner rather than later now you have the extra cash. This happened to us a few years ago and we used the money to move and to do work on our new house. We also had a nice holiday that we wouldn't have otherwise afforded.

Not sure if its been mentioned, but if you're in a fixed rate on your mortgage, its likely that you can only pay off 10% extra without paying a penalty, so your hands are tied a little with that.

Some providers (First Direct etc) allow you overpay without a penalty.

I would check what I could over pay on mortgage assuming not in an early repayment charge, then use some of it to pay off lump sum using mortgage overpayment calculator to see a what amount of interest you have saved over the term, I would save 10k each per child into a stocks and shares isa because at 3&6 there young enough to take stock market risk for long term growth (to get start deposit for house or money towards uni at 18) I would pick my own funds through fidelity personally but if not comfortable advisors can do this for you. Keep 6 month equaliant salary as saving buffer in easy access account/ premium bonds and use rest on debt, house improvement and maybe a family holiday