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Original poster

Clueless £25k

32 replies

Marypoppins19 · 01/06/2022 07:35

So we are a family of 4, bounce in and out of our overdraft every month, not had a holiday for around 5 years. Both work full time and all our evenings are spent running around with clubs and activities for our teenagers.
We have child trust funds set up for the kids, about 1k emergency funds in savings account.
Have another 16 years on our mortgage and a BTL which we over pay and will be a pension as DH doesn’t have one. We have another 20 years on that. We are both 40.

We are I guess always on a bit of a tight rope and never feel like we have got money right.
One of our parents is in a position to give us £25k. We have no idea what best to do with it and don’t want it wasted or swallowed up. Do we have to pay tax on it?

Any advice gratefully received

OP posts:
CurlsLDN · 01/06/2022 07:40

I'm no expert but it seems to me that with the BTL your money is all tied up there, bouncing in and out of your overdraft and only having £1k savings for emergencies seems very precarious.

I think I would:

  1. Ensure overdraft and any other debt is paid off
  2. Top up emergency savings to £10k
  3. Use the rest as your overpayment fund on the BTL so that you can have a year or two off of paying that expense, to give you a good chance to get your day to day finances in more reliable order so you're not going into the overdraft and living on the edge of problems
UrsulaPandress · 01/06/2022 07:41

I’d buy Premium Bonds. Easy access and chance of winning.

Temporaryname158 · 01/06/2022 07:47

I would top up your emergency fund to £10k and pay of debts. It’s your mortgage I’d then pay off with the rest (presuming this won’t cause an early repayment charge) but keep your repayments the same as this will then knock a lot of time off your mortgage if you keep payments the same.

if you are going into your overdraft each month you need to look at outgoings, perhaps each child drops a club, can either of you get a second job that provides a little tip up each month? To balance the books?

I think you need to do something tangible with the money as it would be easy for it to be frittered away.

how much is your outstanding mortgage?

Original poster
Marypoppins19 · 01/06/2022 07:53

Outstanding mortgage is around £170k
BTL is around £100K

OP posts:
Original poster
Marypoppins19 · 01/06/2022 07:55

Interesting idea about Premium Bonds…….

OP posts:
Original poster
Marypoppins19 · 01/06/2022 07:56

We both have extra jobs so with full time too, we are at maximum work capacity

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WooNoodle · 01/06/2022 08:01

Top it up your emergancy savings
Put some in a stocks and shares account

BarbaraofSeville · 01/06/2022 08:32

Never use your overdraft, it's very expensive borrowing. Pay this off and pretend it doesn't exist. The interest rate is about 20 times that on a mortgage so it makes no sense to go into overdraft to overpay a mortgage, which is what you're effectively doing.

Are you short because you genuinely don't have enough to cover essentials or is money leaking away overdraft interest, overpaying for essentials that you could get for less (eg broadband, TV packages) or on frequent small purchases that add up to a lot overall. Do your DC enjoy all the clubs they do and are they worth the money? You may find that these add up to a lot and there are some that they're not that bothered about.

You need to thoroughly review your budget and spending to see where your money is going. Question every expense. Lots of people will do a budget and think it looks OK, with plenty of spare money, but the day to day reality is that they spend hundreds of pounds a month on not very much, that doesn't add much to their life and could easily be cut with more mindful spending.

www.moneysavingexpert.com/banking/budget-planning/

If you get a handle on where your money goes, you'll be in a better position to save for short term bigger purchases like a holiday, have money available for car replacement, be able to overpay the mortgages and also possibly invest in a pension for the tax relief.

Also have a look at the financial flowchart to work out what to do in what order.

ukpersonal.finance/flowchart/

UrsulaPandress · 01/06/2022 08:39

My financial advisor used to laugh at my Premium Bonds. Now he recommends them to others.

Dyrne · 02/06/2022 17:05

You shouldn’t need to pay tax unless sadly your parent dies within 7 years and then it may be subject to IHT.

I agree with others - bouncing into your overdraft to overpay a BTL is madness.

Do a budget so you can account for all money going in vs out because otherwise you’ll find that £25K gets frittered away.

Pay off high interest debt first (credit cards etc). Then give yourselves a £1K “float” in your bank account so that’s your new “zero” and you won’t be bouncing into overdraft every month.

£10K in premium bonds as an emergency fund.

Then for the rest, I’d look at either pension or S&S ISA.

Maybe allocate a certain amount to treat yourselves, to put a limit on it and protect the bulk of the capital - maybe buy some really good camping gear which will open up opportunities for cheap holidays going forward?

FrownedUpon · 02/06/2022 17:13

A 100k BTL isn’t going to provide much of a pension. You need a lot more than that to keep you comfortable in retirement.

whereiscaroline · 04/06/2022 07:07

I would recommend researching Dave Ramsey, he has some very clear steps ("The Baby Steps") which outline a financial plan to be followed.

Step 1 - £1k emergency fund
Step 2 - pay off all debt
Step 3 - save 3-6 months' expenses for an emergency
Steps 4, 5, 6 - do them simultaneously - 15% of income to investments, save for your children's university, overpay the mortgage.

getupstandupsitdown · 04/06/2022 07:14

I'd book a really nice, memorable holiday for you all.
Top up the savings to £10k
Put the rest to the mortgages, or house maintenance/ DIY project

getupstandupsitdown · 04/06/2022 07:15

But clear all debts first

yyydelilah · 04/06/2022 07:27

Pay off as many of your small debts as you can with the £25k.

Try to get rid of as much non mortgage debt as possible. That will free up money month to month.

Personally, I don't see the point of investigating the money at a relatively low rate of interest when you could pay off debt that has a far higher interest rate.

Pay off the overdraft and get rid of it. Pay off any credit card debt and then cut it up.

What are your incomings and outgoings? If you're happy to share.

Are you genuinely short of cash or is it lifestyle creep?

Do you have a budget where everything is written down? That's the best way to see where you can cut back.

yyydelilah · 04/06/2022 07:28

Investing not investigating 😂

Twiglets1 · 04/06/2022 07:29

Definitely treat yourselves and the kids to a nice holiday. Your mortgage interest rate may be low at the moment so see if it is better to pay money off one of your mortgages or put money into a savings account. Chase Bank are offering a good savings account at the moment where you get 1.5% interest on the money saved and it’s immediate access. I’ve put some money into it myself after seeing it recommended by Martin Lewis the money saving expert.

My mortgage interest rate is below 1.5% so for me it made more sense to do that than to pay off 10% of the mortgage. But if your mortgage rate is higher than 1.5% it would make more sense to pay some money off the mortgage.

shandon14 · 04/06/2022 07:38

Consider switching to interest only on your BTL and investing in a pension with the capital repayment sum you are putting in instead. The tax break on a pension is amazing.

BeeLady15 · 04/06/2022 11:09

Your husband should start a pension as you get tax relief on it. You should not be overpaying a BTL mortgage, especially when you’re bouncing in and out of your overdraft. Also, the trust funds for the kids is something I can’t get my mind around when you’re struggling every month and your husband has no pension (other than the BTL). With the £25k I would clear any short term debt, have a nice, but not lavish holiday, get your emergency funds up to £10k and then out the rest in to a pension for your husband. Stop overpaying both mortgages and put this overpayment in to a pension for your husband. Ditto for the savings in to trust funds for kids.

gumballbarry · 05/06/2022 07:53

Have a 6k-8k float in your current account and use a rewards credit card for purchases which you pay off every month by full DD. I personally don't see the point of putting £1k aside for emergencies as if you have an unexpected bill you can get a 0% purchases card and put it on that, paying it back over months instead of topping up the emergency fund again.

It's important to take a holiday, you will regret not doing this when the kids have grown up. Doesn't have to be extravagant.

Don't do premium bonds as the return is poor. If your BTL mortgage allows overpayments without penalty and has a high rate of interest then dump the remainder there.

Musicalmaestro · 07/06/2022 22:09

If it’s your husband’s parent I’d put it in his pension.

Original poster
Marypoppins19 · 08/06/2022 04:58

Sorry I mean the BTL is currently worth £300k but we have £100k left to pay on it.

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Original poster
Marypoppins19 · 08/06/2022 04:59

Sorry I mean that our BTL is worth £300k but we have £100k left on it to pay

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HollowTalk · 08/06/2022 05:06

Why doesn't your husband have a pension through his job?

Original poster
Marypoppins19 · 08/06/2022 05:49

Self employed - he started one but when it was reviewed we were told he’d need to pay in almost £1000 a month to make it possible to live from. So they advised property instead. He’s also an only child and his parents have two properties so he is thinking they will leave him those.
I have a really good pension

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