Late 30s - what to do with 80k

[Spare tyre]

Worked hard, saved for rainy day etc , have cars I want (currently have cancer, will be ok but it’s lovely to know I have a small buffer)

Have a good job, but have around 80k just sitting there probably losing value in real terms

I could in theory nearly paynoff my mortgage, which is around 110k left to go

I keep thinking I should probably buy a rental,place, not for short term gain, but more as a pension pot / house for my 2 year old etc when she leaves home

I’m hands on, so don’t mind a bit of effort.

Don’t really want risk and prefer to have a 10 / 20 year view of things.

I’m late 30s

Any thoughts

[anonymous-user]

I bought a rental place five years ago, was by far the best financial decision I have ever made. So good infact that I am saving up to potentially buy another one.

There is some hassle involved when things need replacing/repairing but overall it has definitely been worth it.

[Kickstart]

Whilst you are deciding check to see if you can put the £80k into a mortgage offset acct

Bigger picture is a more difficult one

Looks like interest rates are going to go up and inflation is high - both US markets and property look expensive - the thing working in your favour is time

Property gives you low cost gearing and if you can fix your mortgage rate for a long time then hopefully you will benefit from rising rents and values but if prices go south then gearing is no fun

On the other side you have the PistonHeads favorite Vanguard and one of their cheap tracker funds

Don’t what area of the country you live in but you might be able to do a bit of both with the £80k

Good luck 🤞

[Simpo Two]

Yes, your £80K will be heading south at 5% a year unfortunately. So in a year it will have a value of only £76K.

The problem IMHO is 'Don't really want risk'. BTL has risks, not least non-paying tenants and damage - and from what I hear, not much return. I don't like borrowing money so I would pay the mortgage off rather than spend money on a BTL. But it's a personal thing.

At late 30's you can afford to take some risk; in fact risk and reward are invariably correlated. If investments should dip, there's plenty of time for them to recover. And that brings me on to pensions, which I'm no expert on but can be jolly good things especially if you're a higher rate taxpayer.

In short there are many more things you can consider than BTL. I get an equal or better return from a portfolio of investments and for no effort. The first thing might be to get as tax efficient as possible, 'cos £1 saved is £1 earned

[xeny]

Spare tyre said:

Don’t really want risk and prefer to have a 10 / 20 year view of things.

I’m late 30s

I wish I'd worked out in my late 30s that having a 10/20 year time horizon means you can afford more volatility than having a 5 year time horizon in my 50s.

[worsy]

"The biggest risk is not taking any risk, in a world that's changing really quickly, the only strategy that is guaranteed to fail is not taking risks."

Mark Zuckerberg

[VR99]

Op, I would echo some of the other comments here on the risk aspect..if you have a long term view as mentioned let's say 20 ish years then hopefully that's enough time to take some risks and ride out the peaks and troughs along the way, thinking of investments here in particular.
I'm not a young as you but in a similar boat and as a result I'm pushing as much as I can into my pension (salary sacrificing all pay in the 40% tax bucket), maxing out the S&SISA and till last yr also the LISA but won't be making any further contributions to that.
As for the rest, maybe some home improvements...my thinking is that rather than losing to inflation if spending on the house will help increase asset value then why not( assuming they aren't hideous 'improvements')

Edit: you mentioned cancer and hope you make a full recovery.....life is short..if you have been saving hard and generally being careful then maybe consider splurging on something you like...Yolo and all that

Edited by VR99 on Wednesday 9th February 10:54

Edited by VR99 on Wednesday 9th February 11:03

[AllyM]

VR99 said:

and till last yr also the LISA but won't be making any further contributions to that.

Just curious, why you have have stopped LISA contributions?

I’m early 30’s and have been putting in £4K every year since it opened, seems quite a nice thing, tax back and tax free at the other side.

[VR99]

AllyM said:

VR99 said:

and till last yr also the LISA but won't be making any further contributions to that.

Just curious, why you have have stopped LISA contributions?

I’m early 30’s and have been putting in £4K every year since it opened, seems quite a nice thing, tax back and tax free at the other side.

Completely agree with the benefits of a LISA however my original plan was to use it as a property deposit...plans have changed now so I think it's more than likely will use as a supplement to my pension...received about 4 tax years worth of HMRC bonus so not complaining but it's 1 more account to manage and I like simplicity....it's in a Vanguard global ETF so will just let it do its thing.

[av185]

Low cost global tracker.

[Mikee19]

av185 said:

Low cost global tracker.

Bit risky at the moment? (Even global tracker)

Obviously you would be ok in the long run but it might be hard to watch it over the next year?

[dundarach]

£60K of mortgage

£30K in rainy day pot

£10K in serious holiday to see things you've always wanted to

[rustyuk]

Maybe putting some into your pension and getting the tax relief could be a good financial bet, especially if you are a 40% tax payer.

Not very exciting but could potentially pay dividends when you hit 57.

£80k (40% Tax Payer) with an 8% return into a SIPP would be around £550,000 in 20 years, £667,000 in 22 years, £822,000 in 25 years

[av185]

Mikee19 said:

av185 said:

Low cost global tracker.

Bit risky at the moment? (Even global tracker)

Obviously you would be ok in the long run but it might be hard to watch it over the next year?

Although no more risky than being out of the markets in cash/low deposit rates subject to rising inflation eroding capital value etc.

[Simpo Two]

av185 said:

Mikee19 said:

av185 said:

Low cost global tracker.

Bit risky at the moment? (Even global tracker)

Obviously you would be ok in the long run but it might be hard to watch it over the next year?

Although no more risky than being out of the markets in cash/low deposit rates subject to rising inflation eroding capital value etc.

One could argue that cash has no element of risk - it is absolutely *guaranteed* to lose value! So if inflation will reduce its value by (say) 5%, but you invest it in something that loses (say) 3%, you're still better off than if you'd left it in cash...

[swanseaboydan]

dundarach said:

£60K of mortgage

£30K in rainy day pot

£10K in serious holiday to see things you've always wanted to

I second this

[Mikee19]

av185 said:

Mikee19 said:

av185 said:

Low cost global tracker.

Bit risky at the moment? (Even global tracker)

Obviously you would be ok in the long run but it might be hard to watch it over the next year?

Although no more risky than being out of the markets in cash/low deposit rates subject to rising inflation eroding capital value etc.

I guess it depends if you think there will be a world wide recession or not. Market falls and inflation increases you lose lose in the short term.

If you have cash you could potentially buy in the dip.

Anyway if you have a mortgage for more than the cash value on a low rate your cash isn't eroding as your debt will be eroding at the same time. Put the cash back into your mortgage and you have lost 1%.

[Seventyseven7]

swanseaboydan said:

dundarach said:

£60K of mortgage

£30K in rainy day pot

£10K in serious holiday to see things you've always wanted to

I second this

This, but take 10k from that mortgage fund and add it to the holiday fund.

[boombang]

rustyuk said:

Maybe putting some into your pension and getting the tax relief could be a good financial bet, especially if you are a 40% tax payer.

Not very exciting but could potentially pay dividends when you hit 57.

£80k (40% Tax Payer) with an 8% return into a SIPP would be around £550,000 in 20 years, £667,000 in 22 years, £822,000 in 25 years

That approach sits well with me - live off the pot and use both current and unused previous year annual pension allowances to bolster pension pot. Chunky savings on income tax and NI via salary sacrifice with no impact to lifestyle.

Still do the holiday though.

[mark seeker]

dundarach said:

£60K of mortgage

£30K in rainy day pot

£10K in serious holiday to see things you've always wanted to

I'd go along a similar idea, use £40k for a S&S ISA in a global low cost tracker (Vanguard or similar) - £20k this tax year, £20k after April (probably split over a few payments if you want to smooth out the bumps)

£10k holiday

£30k mortgage overpayment