Stuck in poverty mindset

[ForeverInPoverty]

I’ve recently come into some money (couple of hundred thousand) having always been careful with money and I don’t know how to deal with it.

I see people going on posh holidays or drive fancy cars which I could now afford, but I balk at the “waste” of money.

Just because i’ve now got more, doesn’t mean the value of it has changed! Yet it seems madness not to treat myself to things i’ve gone without for years.

I know I can give to charity, friends etc, and have done. My question is more, if you’ve lived in poverty, do you ever lose that mindset?

You should never lose that mindset. A couple hundred thousand isn’t really a lot. You need to keep it quiet. You need to put it in pensions , saving pots so you can have something for later.

Invest in your skills.

You will soon be in poverty again if you don’t.

Invest it. Don't spend it.

What’s your pension situation?
I came into quite a chunk of money. I made a mix of investments/ pension and luxury purchases. Unfortunately a lot of it went in divorce. If I was going to spend it again I would have put an awful lot more into my pension.

I would pay off any debt (apart from mortgage if you have one unless its very small). With whatever is left i would take 20% for 'fun' whether thats towards a new car/fancy holiday etc another 20% on home improvements to make life a bit easier. Remaining 60% into savings/investments/pension etc

Its ok saying you could be in a similar position in 10 years etc but time is not a guarantee for any of us, no matter how healthy or young ....

So I would certainly enjoy this money a little by making home a little more comfy and a nice treat of a holiday.

Does Revolute offer a good savings account?

Im a retired IFA, anyone in your circumstances id advise to put the money on deposit with National Savings until you have developed a longer term plan.

The reason is that normal bank accounts offer protection through the FSCS ( Financial services compensation scheme) up to £85,000. National savings don't offer the best interest rate but are protected from insolvency.

Your approach is right. Once the money is spent you are back to square one, so think through your short, medium and long term needs, then take advice which is always tailored to your indiclvidual needs.

Firstly congratulations, although I am mindful sometimes money acquired can be as of bereavement.

there is no need to spend this now, you can pop it in a savings account.

secondly I would be VERY mindful who you tell, you will be surprised you may acquire new friends who may need money etc. personally I wouldn’t tell friends until you have spent the majority of it, or have it secured so you can’t touch it. Possibly a most close someone you could give a small token gift to.

seeing you bought berries as were pleased I am sure you will be wise, please be careful though.

long term consider have you a home / mortgage / pension / reliable average car for your needs? Savings are good to.

The berries thing would be me.

I'd never buy a brand new car, or even consider changing my recent one unless it was costing me money, as in needing money thrown at it to keep it road worthy.

I've already got a house and don't intend on moving, I would however love to have a monthly/Bi monthly facial/manicure, and instead of having my hair done every 6/8 months I'd have that done more regularly, that's about the extent of what my wants are.

The rest would be put into premium bonds and split between good savings accounts as I don't like to risk gambling on stocks or such.

Yes and no for me...I inherited far more than expected from my parents last year, having lived frugally for years (single parent from when DC were 11 and 6). I still look for the special offers, yellow stickers etc and won't waste food, but I have allowed myself a few treats like new sheets, some home improvements...I think it's going to be a gradual acceptance of my new financial position, but can't imagine ever letting go of some frugal habits. I'll still buy most of my clothes and books from charity shops!
Do seek financial advice- it's on my to-do list.

I think the best advice for people who experience unexpected windfall of money is to put money in some saving account for a year and try not to plan anything (unless you have debt). Use this time to educate yourself about money, investing, planning for future, then act accordingly. You had lifetime of thinking about money as something very scarce, you need time to adjust.

I don't have several hundred thousands, but I do have a bank account just for my 'fun money'. I found that I could never give myself permission to spend on myself from the main account - I was always balancing my wants against other financial priorities and dropping myself off of the list. So you might want to pick a percentage and do the same. You don't need to spend it straight away, just know it's there and that you don't have to feel guilty about using it for you and not for the pension/ mortgage/ family etc. I can't imagine you'll blow it all on a Ferrari anyway - for frugal people the problem is feeling like after your £4 berries you need to slow down on the spending!

I definitely wouldn't buy a fancy car. Personally I don't view a fancy holiday as a waste if its something you'll enjoy though.
It just depends on your priorities. Holidays are very valuable life experiences in my opinion. I wouldn't spend an unnecessary amount on them though, would still go for cheaper options.

My husband grew up in poverty (single parent earner, no holidays except the odd camping trip, stretch a chicken all week - but still fed, clothed and roof comfortably overhead). We now have been lucky and have worked hard, occasionally he will get shocked so i dont think hes totally over it, although it tends to be small stuff that sends him over the edge (a bottle of olive oil from Tesco recently made him stop using it and now we just use vegetable because he can't cope!) However, holidays, cars and other big ticket items he copes ok with (suspect because he never had them so had no cost comparison, whereas a pair of jeans drives him mad and he still buys his at Tesco or on vinted).
I suspect you might need some time. Also, nothing stops you wanting/loving a bargain. Maybe think about a list or a plan of things you want (travel, clothing, paying things off, a car etc) then work out a budget for each thing. If you know you're getting a good deal, it's not a waste, it's what it costs. Also if it's in a high interest account, can you buy things with the interest which always feels lovely as its basically free!
Put some into something super sensible for balance too, might make you feel less profligate.

I quite like the person's post where they said if you put in a savings you would make 600 a ,!month without doing anything that is a nice amount to put to treats or just everyday stuff without touching the full amount

Travel
Treat your friends to a nice restaurant or set up a dining club.
Treat yourself and buy your Prosecco in F&M instead of Lidl.
Roll around on the floor.
Buy newspapers with Rachel Reeves on the cover for your cat's litter tray (I used to do this with Boris).
Make a list of all the things you enjoy and have fun!

Well a couple of hundred thousand isnt go out and buy whagever you want money. But it could give you a chance to not worry about money.
Take time to educate yourself on savings and investments. And see how you can set up to never worry about money again.
I would possjbly splurge on some smaller things, like buy the coat, replace the faulty washing machine. But not spend on bags and trips and have nothing left .

Had a similar situation where inherited amounts that to myself & hubby were just way more than we could have imagined.
we put most in two year bond (wow - the tax bill!)
we have now, five years later, splurged £7k on new windows.
we are happy with our UK holiday & our ten years old car but we are now coming round to the idea that we have options. It just takes a while & I don’t think that’s a bad thing.

I think it's a wise mindset to have.

My husband had a tricky childhood with v little, it's made him brilliant with money now.

Set aside a budget for yourself, and then maybe invest in property to make it worthwhile. Dont waste it, but enjoy it too.

buy a house. live in it. be warm. eat well. relax,

If you put cash into a savings account, it will dwindle because interest payments are almost always less than inflation. Inflation goes up and down but you will never regain what you have lost.

It does no harm to have a cash buffer, where the interest will not be taxed ( such as premium bonds or a cash ISA) but in the long run, you will do better with an asset-backed investment. Nothing racy, you can expect a dull but pretty safe return in index tracker ETFs, and generalist investment trusts. Try to avoid things that are fashionable, or exotic, or have recently gone up a lot. It is quite good practice to dribble in your investment over a year or more to avoid buying on a peak. Don't sell in a trough, that's an amateur mistake guaranteed to lose money. You hope to make big capital gains, and lots of dividends on your investments, so move a fraction into a low cost ISA each year to avoid tax. Put what you can into your pension (you are allowed to contribute up to the amount of your taxable earnings each tax year) and and ISA (you are allowed to contribute up to £20k each tax year). You are allowed to hold up to £50k in Premium Bonds. Pay off your mortgage, loans and credit cards, as each pound owed will cost you more than the interest you earn on a pound of cash. Pay off the highest interest ones first.

Give yourself a "fun" budget, of what you feel you can afford to squander per month, on shoes, prosecco or foreign holidays, whatever you choose.

Time for some investment advice, I think the only thing I can say is, once spent you cannot get it back.
Don’t think about now, think about retirement and long term security, carry on the way you are, unless there is something you really need to change like forever renting, rather than owning.
But, don’t overburden yourself.

I would have a look at the rebel finance school on YouTube. The did a whole course (which is free) aimed at helping people with finances and investing, and one of the weeks also looked at beliefs and mindset around money. It really is worth a watch before you decide what to do with your money, and there’s a super helpful Facebook group alongside it too.

I was also coming to recommend Rebel Finance School, I’ve found it very useful and empowering. It will take a little time but is a worthy investment in your future. In the meantime, split the money across a number of unrelated banks, or into NS&I which is underwritten by the government and not subject to the £85k deposit protection limit. Also books like Die with zero (getting all you can from your money and your life) by Bill Perkins could be useful to help you plan your future. Wishing you well.

Personally, it has never left me. The fear when the VAT bailiffs come knocking on your door to take everything you own (long story) has burned deep.

Stop calling it a poverty mindset. It's a sensible mindset. A knowledge of the real value of things mindset. A mindset of knowing what is important.
Money is just a tool that you can use to escape from worry, debt, fear, and injustice . Why would it change how you prioritise things?