How best to spend £100k

[gigthenfishdelish]

We have come into 100k.

We have a mortgage of 150k, equity £350k. We have small pensions, 10k debt, no savings or investments aside from savings account for 14 year old DS. Total income is £80k in secure jobs and we are mid 40's.

What would be the best use of the money? We have not made the best decisions in the past with money so would like this to go as far as possible.

Thank you for all advice.

I would clear 50k off mortgage. 10k debt and the other 40 in home improvements/holiday/new car. 100k left on mortgage will be cleared before you know it. Best of luck with whatever you decide OP

Firstly I'd pay off the debt. That should help your monthly budget. Might be an idea to open an ISA with this year's allowance (20K) as they might be reduced. Are you likely to have any major expenses short term? Car replacement? If so make an allowance. Perhaps have a good family holiday and pay whatevers left into your pension
That way you will feel the benefit each month, have some emergency savings, created some memories and invested in your future.

Pay off the £10k debt if its interest bearing, if you want to make mortgage OPs max out this year's OP allowance. Save/ invest the rest.

Debt first.
Chunk off the mortgage.
Savings account.
Some treats may be a holiday and some new things for you all.
Increase the proportion you pay into both of your pensions as you.Now have this chunk of money to fall back on

Clear £10k debt. That leaves £90k.

To be honest, I’d downsize. Take the £350k equity and buy outright.

£40k each into pensions. Leaves £10k for house renovations or a holiday. Save your mortgage payments each month. Start with an emergency fund

Pay off the debt and set up additional monthly contributions into both your pensions.

If you are bad with money, I’d pay off the debt then put the rest in a pension so you can’t touch it tbh

I'd clear the debt, take a chunk off the mortgage (maybe £50k?), and stick the rest in your pensions. Then I'd put the money you were paying down debt with each month into savings. This way you're no worse off each month, but you've got more house equity, money going into savings, and money earning compound interest for as long as possible in pensions.

Unless you know you've got a big expensive house job coming on the horizon like a new roof or something, then I'd do that too (at the expense of paying the mortgage down).

Agree with previous posts- pay off debt immediately, chunk into mortgage, chunk into pensions/savings

I’d pay off the debt, put £20K aside in the highest interest accessible savings account as you can for emergencies (check out Martin money saving chap for advice on savings accounts) Go on a dream holiday. When is your mortgage up for review? If it’s soon, I’d put the rest to reduce your mortgage as soon as you can without penalty. If you’re locked in for a while I’d put the maximum overpayment into for this year and put the rest into your pensions. Put the money you have been paying each month towards the debt into pensions.

That’s what I’d do anyway!

Pay off the debt and put £40k in each pension. Put £50k into the mortgage. £10K savings account.

That’s more than 100k?

Give it to me 😃

I would pay off debts 10k
Reduce mortgage 50k
10k into each pension
20k for savings and a holiday!

Well this is the windfall (sorry if you have sadly got this due to inheritance) that is your opportunity to start afresh and never be bad with money again.

£100k
pay off all debts in full

£90k remaining
put £15k in a high interest savings account/ISA. This is now your emergency fund. But it is for emergencies and to prevent you taking credit card debt again. It’s not for whimsical spending or nice to haves. Don’t touch it!

£75k remaining
£5k into an account for holidays and to enjoy some treats but again don’t fritter it.

£70k remaining
being in your 40’s with no or little pension is not a good position to be in. Put £35k each into yours and DP’s pensions.

you are now onto a clean slate, have had some treats, have emergencies covered and have also prepared for the future.

going forward join the rebel finance school and watch their free videos so you are more informed about money

use the money you are now not spending on debt repayment to split 2 ways between the below

• continue to add to your pensions
• Put in a savings account so that if the washing machine breaks, the car needs a repair, you have the money to hand and aren’t reaching for the credit cards.

What is your pension set up? You do want tax relief on pension payments so check what you can actually do to make sure you get these. Are you self employed?

Definitely pay off debt. Look at mortgage but how long has it to run? How much difference would it make if you reduced it by 1/3? Could you get a better deal by shopping around anyway? £350,000 equity isn’t huge - you could buy a bigger house if this one isn’t great. We have tended to do that with secure income and no bumps in the road. You might even enjoy a better house! We have. Downsizing is for retirees, not 40 somethings. Enjoy where you live if you don’t already.

What are the interest rates on your debt and mortgage?
is the income taxable?
at mid-40’s you really need to be thinking about building your pension pots too - but in your situation I wouldn’t spend much on a holiday - look to your futures.

why is everyone saying to pay £50k off the mortgage when the OP hasn't posted what the interest % is? Unless the mortgage rate is unusually high, paying off a chunk of the mortgage likely isn't the best financial option.

Pay of debt (not including mortgage)
Make sure you have 6 months of expenses in cash as an emergency fund
Allocate 5-10% of the money for living life and making memories with your kids.
With the remainder look at either putting into your pension (you will benefit from tax relief but won't be able to access it until 57) or open a stocks and shares ISA and invest in a global ETF fund.

Also, depending on mortgage terms, you may only be able to pay 10% off the mortgage without incurring penalties.

Because MN is weirdly obsessed with paying off mortgages.

The OP could have posted that they took out a 10 year 1.19% fix in 2021 and people would still be telling her to put it towards the mortgage.

I agree broadly with what you suggest @Hitchens but I'd also want to know if they're planning any large purchases like home improvements or car replacement in the next couple of years that the money could fund without borrowing.

Also what the OP means by secure jobs and small pensions because secure jobs generally also mean a decent pension because that's another MN weirdness, unless you're on track to a £1M+ pension pot, you'll be in poverty in your old age with your 'small pension' covering nothing more than sitting in the cold and dark eating beans.

It would also be relevant if 'we' were married or not and their income split ie the answer might vary if they earn £40k each rather than one partner earning £60k and the other £20k due to tax allowances.

I didn’t say pay off mortgage! I’d get a better house and enjoy it for 20 plus years. Work for pension input using tax allowances.

Definitely pay off the debt. I'd be inclined to downsize as a PP has also said - no more mortgage payments and that money you were paying can be used for other things. But there's the stamp duty to pay.

Is it really worth bothering dumping a low five figure sum in a pension at this point in OPs life? It won't grow much. You need a chunky six figure pot to have a comfortable pension.

So it depends on a few things, but for now I'd pay the debt and with £40k use your ISA allowances in two fixed term cash ISA's before Reeves lowers the allowance.

As suggested by the clever poster above I would sign up to the rebel finance course and catch up what you’ve missed so far. Pay off 10k debit unless interest fee. Once you’ve done the course you’ll know what to do anyway.

I'd clear the £10k debt, and use all the rest to pay down the mortgage.

I'd put the remaining mortgage on a repayment plan that would clear it by whatever retirement age you have planned for, to reduce the monthly repayments to it's lowest level, and guarantee it's gone when your earnings reduce.

I'd immediately start to pay the maximum amount I could now afford monthly into pensions - i.e. calculated to leave enough in your monthly income to meet everyday needs, including an excess for surprises/holidays.

This way you benefit from the windfall immediately, you prepare for and secure your future and you won't fritter it away. But that's just me 😉

Good advice from @Hitchens and @Temporaryname158

Pay the short term debt, set up your emergency fund, bit of cash for fun if you like. Then invest the rest either inside your pensions or a S&S ISA. There are loads of articles online about pension v ISA so have a read about the pros and cons and different tax treatments. My personal view is that it’s good to have both- the ISA gives you flexibility in case you need to access the money before 57/58.

Then as pp says you can redirect your debt repayments into your pension.

On the mortgage, whether it’s worth overpaying depends on your circumstances and risk tolerance. We are just coming off a low fix and have been making some big overpayments because we’re planning to retire within 5-6 years and want to be debt-free. This isn’t your situation though. Alternatively maybe you have v low risk tolerance and can’t bear to invest but love the idea of being mortgage free- in that case you need to consider whether you can get a better savings rate than your mortgage rate. It’s not a question of whether overpaying the mortgage is right or wrong but of whether it’s right for you in your particular circs. But from what you’ve said, it’s likely that some sort of tax efficient investing is very likely to be the better option.