Windfall help- where to put money
Discussion
Hi all,
I am not one to usually inhabit this part of the forum, but was wondering if I could get some thoughts/advice on what to do with a windfall that my wife and I have just received.
Essentially, we have received ~£190k and for us this is a large sum and we know it could help us long term.
Our current situation is this:
Both mid 30’s
40% tax payers
Have a mortgage
Already have some savings (ISA) + emergency fund set aside
We have a small amount of money on a 0% credit card.
So, I would like to know what you would do? I am conscious of high interest savings and then being lumbered with more tax and want to think of alternatives.
Tempted to buy a manual Ferrari and hope for the best 😂
I am not one to usually inhabit this part of the forum, but was wondering if I could get some thoughts/advice on what to do with a windfall that my wife and I have just received.
Essentially, we have received ~£190k and for us this is a large sum and we know it could help us long term.
Our current situation is this:
Both mid 30’s
40% tax payers
Have a mortgage
Already have some savings (ISA) + emergency fund set aside
We have a small amount of money on a 0% credit card.
So, I would like to know what you would do? I am conscious of high interest savings and then being lumbered with more tax and want to think of alternatives.
Tempted to buy a manual Ferrari and hope for the best 😂
Look up the flowchart on UKpersonalfinance reddit and follow that.
https://ukpersonal.finance/flowchart/#have-you-see...
Personally I’d take some percentage (10%) as treat yourself guilt free money.
Take half the rest to pay towards mortgage.
The other half fills any remaining ISA limits in an isa stocks and shares account. Probably an index fund like vanguard VALL or VWRP if you won’t need the money for 5+ years.
Any remaining funds go into VALL or VWRP in a general investment account.
https://ukpersonal.finance/flowchart/#have-you-see...
Personally I’d take some percentage (10%) as treat yourself guilt free money.
Take half the rest to pay towards mortgage.
The other half fills any remaining ISA limits in an isa stocks and shares account. Probably an index fund like vanguard VALL or VWRP if you won’t need the money for 5+ years.
Any remaining funds go into VALL or VWRP in a general investment account.
ConnectionError said:
Pay off mortgage
Not necessarily the best route forward.Personally I would
Top up ISAs (potentially 4x 20k) this fy and next. That's 80k gone. If you open a Lisa, there's free money waiting.
Potentially lump a load into a sipp?
Potentially open a premium bond account for you and partner 2x 50k. For the short term as you're going to be paying 40% tax on any interest elsewhere.
Maybe set some of the aside for a mortgage overpayment (don't get caught out by any excessive overpayment fees), however depending on your current rate it may not make sense to overpay at this time of you can get a better return elsewhere.
Treat yourself to a nice holiday.
Spend £190k on tinned baked beans to prep for impending doom
Or consider clearing mortgage but also consider investing that same money to see if you can get a better rate of return than your mortgage interest rate.
Tax free investment such as ISA, pension etc but be aware of the unknown age that a pension can be drawn which might change over the years
Or consider clearing mortgage but also consider investing that same money to see if you can get a better rate of return than your mortgage interest rate.
Tax free investment such as ISA, pension etc but be aware of the unknown age that a pension can be drawn which might change over the years
Might need a few more details ( size of mortgage ,any moving plans etc ) but not sure at this point I'd be worrying about the potential tax on savings as the main priority especially if you already have the emergency fund in place.
Probably quite a bit of scope for doing a bit of everything within that windfall including a fun car !
Probably quite a bit of scope for doing a bit of everything within that windfall including a fun car !
I love the manual Ferrari idea, and I would be tempted to do that but financially probably not the best idea.
As others have said I would do stocks and shares LISA and ISA for this year and next so that's £40k gone. LISA will get you an extra £4k if you put £4k in each for both years. I would go for a low cost global tracker e.g HSBC FTSE All World or VWRP.
Then I'd pay into SIPP each the difference between your taxable earnings and £50,270 to maximise the 40% tax relief. You could do this for a couple of years too.
You don't say what your mortgage balance is or the rate. If you have enough left to clear the mortgage, I'd do that otherwise I would pay the maximum without any overpayment penalties. Unless of course your on like 2%, in which case I'd put it in premium bonds and then when your deal runs out, pay off as much as you can.
Then I'd treat yourself to something you've always wanted, knowing that you have invested the majority.
ETA I'd get rid of the credit card balance too, even though it's only small and 0% but at least it's gone then.
As others have said I would do stocks and shares LISA and ISA for this year and next so that's £40k gone. LISA will get you an extra £4k if you put £4k in each for both years. I would go for a low cost global tracker e.g HSBC FTSE All World or VWRP.
Then I'd pay into SIPP each the difference between your taxable earnings and £50,270 to maximise the 40% tax relief. You could do this for a couple of years too.
You don't say what your mortgage balance is or the rate. If you have enough left to clear the mortgage, I'd do that otherwise I would pay the maximum without any overpayment penalties. Unless of course your on like 2%, in which case I'd put it in premium bonds and then when your deal runs out, pay off as much as you can.
Then I'd treat yourself to something you've always wanted, knowing that you have invested the majority.
ETA I'd get rid of the credit card balance too, even though it's only small and 0% but at least it's gone then.
Edited by Josemartinez on Friday 23 October 09:44
Baked_bean said:
So, I would like to know what you would do? I am conscious of high interest savings and then being lumbered with more tax and want to think of alternatives.
Low yield gilts held to maturity. The majority of the gain is capital and gilts are CGT free. Have a read of https://www.moneysavingexpert.com/savings/uk-gilts...For future flexibility it may well make sense to use your ISA allowances each year to progressively get the money into ISAs.
More generally, the UK personal finance flowchart is worth running through. Depending on jobs/pension options, you might usefully massively increase pension contributions and use some of the money to top up living costs while you are doing that. You'd pay less income tax now, and get the money into tax wrappers sooner.
Edited by xeny on Friday 23 October 09:45
Baked_bean said:
Hi all,
I am not one to usually inhabit this part of the forum, but was wondering if I could get some thoughts/advice on what to do with a windfall that my wife and I have just received.
Essentially, we have received ~£190k and for us this is a large sum and we know it could help us long term.
Our current situation is this:
Both mid 30 s
40% tax payers
Have a mortgage
Already have some savings (ISA) + emergency fund set aside
We have a small amount of money on a 0% credit card.
So, I would like to know what you would do? I am conscious of high interest savings and then being lumbered with more tax and want to think of alternatives.
Tempted to buy a manual Ferrari and hope for the best ?
You mention savings - what about investments? Pensions? Stocks & Shares ISAs? I am not one to usually inhabit this part of the forum, but was wondering if I could get some thoughts/advice on what to do with a windfall that my wife and I have just received.
Essentially, we have received ~£190k and for us this is a large sum and we know it could help us long term.
Our current situation is this:
Both mid 30 s
40% tax payers
Have a mortgage
Already have some savings (ISA) + emergency fund set aside
We have a small amount of money on a 0% credit card.
So, I would like to know what you would do? I am conscious of high interest savings and then being lumbered with more tax and want to think of alternatives.
Tempted to buy a manual Ferrari and hope for the best ?
It's hard for anyone to offer useful advice without a fuller picture.
No mention of mortgage size, but pay off/reduce as able. Keep money to one side to ckear 9% card when deal ends. For emergebcy funds Premium Bonds as wins tax exempt and you are higher rate taxpayers. Once mortgage gone save surplus income into equity ISAs (up to 20kpa each so plenty of scope) and also consider more into pensions for higher rate relief.
simon800 said:
You mention savings - what about investments? Pensions? Stocks & Shares ISAs?
It's hard for anyone to offer useful advice without a fuller picture.
This - You'll get the boring folks say "pay off the mortgage" and you'll get the logical folks say "stick it in the stock market for 20+ years" - both are right in the right context. It's hard for anyone to offer useful advice without a fuller picture.
I'd start by thinking more around a) what the rest of your investments / net worth looks like and b) what do you want this windfall to actually do for you.
Depending on the answers, the options may be as far apart as to buy a better ferrari or stick it in your pension......
Baked_bean said:
we have received ~£190k....
40% tax payers
Have a mortgage
Already have some savings (ISA) + emergency fund set aside
We have a small amount of money on a 0% credit card.
Without knowing actual debt numbers/details it's difficult to say. 40% tax payers
Have a mortgage
Already have some savings (ISA) + emergency fund set aside
We have a small amount of money on a 0% credit card.
I'd be putting the amount owed on the credit card to one side to pay off in full when the 0% deal ends, depending when this is and how much it is would dictate where you can/should put it.
If there's any money left I'd pay off the mortgage, or at least look at the debt terms, if you are paying more interest on the borrowed money than you'd get investing it pay off the debt or at least look at reducing it if the money will not clear it.
It then depends if there's any left, if this wipes it all out I'd look back and reduce the mortgage money contribution, to get a number you refer to as 'a large sum' and see it disappear paying off debt seems a bit depressing, spend a bit having fun, a holiday you've always promised each other, a weekend car, home improvements, what ever floats your boat.
If you have any debts with interest rates over 6% I'd probably pay that off. Otherwise I wouldn't think too hard about it, I would just work out what proportion of money I definitely needed within five years, put that in a savings account, and put the rest 100% in equity. Paying off a mortgage is almost entirely a psychological exercise. Your net worth won't change.
Cats_pyjamas said:
ConnectionError said:
Pay off mortgage
Not necessarily the best route forward.Personally I would
Top up ISAs (potentially 4x 20k) this fy and next. That's 80k gone. If you open a Lisa, there's free money waiting.
Potentially lump a load into a sipp?
Potentially open a premium bond account for you and partner 2x 50k. For the short term as you're going to be paying 40% tax on any interest elsewhere.
Maybe set some of the aside for a mortgage overpayment (don't get caught out by any excessive overpayment fees), however depending on your current rate it may not make sense to overpay at this time of you can get a better return elsewhere.
Treat yourself to a nice holiday.
If you push the 'pay off your mortgage' people they will mostly admit that it was an emotional decision rather than a cold-eyed rational one. Maximise your opportunities for tax free returns, do some of those things you've been meaning to do, and take a longer view with your windfall.
Investing typically returns more than paying off the mortgage in the long term but you need to factor in how you feel as well as the £ implications.
I don't know when your mortgage expires but, and I know that I've preached it before, there is something called an offset mortgage which are common in the US but not here and they allow you to offset a bank account against a mortgage. In effect it gives you the ability to overpay the mortgage but take back the overpayments so it gives you a great place to park money temporarily (or longer if you don't want to invest) whilst maximising it's value. The downside of course is that without financial discipline you can spend it!
I don't know when your mortgage expires but, and I know that I've preached it before, there is something called an offset mortgage which are common in the US but not here and they allow you to offset a bank account against a mortgage. In effect it gives you the ability to overpay the mortgage but take back the overpayments so it gives you a great place to park money temporarily (or longer if you don't want to invest) whilst maximising it's value. The downside of course is that without financial discipline you can spend it!
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