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    • bcfclee27
    • By bcfclee27 6th Sep 17, 10:36 AM
    • 52Posts
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    bcfclee27
    What to do with my inheritance ?
    • #1
    • 6th Sep 17, 10:36 AM
    What to do with my inheritance ? 6th Sep 17 at 10:36 AM
    Hi all, just looking for advice on what to do with a sizeable inheritance. My father passed away leaving me a sum that I want to use wisely......

    I'm 37 in police and wife is a teacher so we have decent pensions.
    We have 2 kids no plans for anymore.

    House worth about 460k.
    2 year fixed mortgage ending 31 Jan 2018.
    Current mortgage left 264k

    6k loan paying off £112 a month for next 56 months.
    4K loan to father in law £250 a month (interest free)

    3k in savings.

    Received 160k from dad with a possible 30k to come from his shares.

    So what do I do with the money - I imagine the smart move is to...
    1) pay loans off at least the 6k one because of the interest.
    2) keep 20k emergency savings
    3) stick the lot of what's left into my mortgage.

    So just looking for advice on what to do with it all.
    Many thanks.
Page 2
    • bcfclee27
    • By bcfclee27 7th Sep 17, 12:17 PM
    • 52 Posts
    • 7 Thanks
    bcfclee27
    Because mtgs today are cheap. Mine is 1%. Our pensions have doubled in the last 10 years. So save 1% interest, or make 5% or more PA over inflation?
    Originally posted by atush
    OK so IF in say 5 years time mortgages started to rise, would that be the time to cash ISAs in and pay the mortgage off, or with VLS type passive investing is it really a case of leave for 20 - 30 years for it to grow.
    • Anonymous101
    • By Anonymous101 7th Sep 17, 2:29 PM
    • 977 Posts
    • 343 Thanks
    Anonymous101
    A mate sent me this earlier today asking what I thought... its American but this is a good example of what I'm doing.

    http://www.investmentzen.com/blog/should-i-pay-off-my-mortgage-early-or-invest/
    • AnotherJoe
    • By AnotherJoe 7th Sep 17, 3:45 PM
    • 7,221 Posts
    • 7,725 Thanks
    AnotherJoe
    The only problem is my wife is very risk averse and sees the money as a one off gift if you like that we need to invest securely - ie the mortgage.


    The thought of placing large sums in stocks and shares ISAs to her would be like taking it all down Ladbrokes and losing it all.


    How about if I did something in between say 80k into the stocks and shares ISAs (VLS 80 ) and 100k off the mortgage ?


    In regards to the loans I shall pay both them off.


    In regards to getting into debt it was a one off rather than poorly managed lifestyles. House improvements (central heating) that we could do at a significant saving (hence the dad loan).
    Originally posted by bcfclee27
    What risk(s) is she worried about? You would both seem to have good job security. You have rock solid pensions.

    Yes, some combination of pay off mortgage and extra pension would be preferable (IMHO) to putting it all against a very low cost mortgage now, also its a mortgage that is less than, and is being eroded away by, inflation,because the rate is less than inflation, so again financially (not for peace of mind) the later you pay it off the better because every year in real terms its worth less even if the headline number stays the same.

    Without doing the sums to work out the exact numbers, lets say you pay the final £100 off in 20 years time. If you paid that off today with £100 it would cost you £100. If you paid it off it 20 years time it might cost you £50 in todays terms, because the pound will be worth less than the pound today - it might only buy you one Mars Bar than two now for example.

    The alternative, as outlined as an option in the Monevator article is pay it off now (or as much as you can) and then use the "freed up" mortgage payments to add into a pension. The downside with that is opportunity cost, you've lost (say) £50k-£100k compounding over 20 years instead you are trickle feeding it in. You are also, back to inflation again, putting in money thats worth much less at the end than now. One pound now is probably worth an investment of two in 20 years time just to keep even with inflation. So you should pay off the mortgage as late as possible.

    Of course, if your wife will have conniptions every time she sees a headline about the FTSE dropping 1 % today, then maybe for peace of mind, even though in your specific circumstances its pretty much a clear cut bad financial decision, you should pay off a large chunk at least of the mortgage.
    • bcfclee27
    • By bcfclee27 7th Sep 17, 3:55 PM
    • 52 Posts
    • 7 Thanks
    bcfclee27
    What risk(s) is she worried about? You would both seem to have good job security. You have rock solid pensions.

    Yes, some combination of pay off mortgage and extra pension would be preferable (IMHO) to putting it all against a very low cost mortgage now, also its a mortgage that is less than, and is being eroded away by, inflation,because the rate is less than inflation, so again financially (not for peace of mind) the later you pay it off the better because every year in real terms its worth less even if the headline number stays the same.

    Without doing the sums to work out the exact numbers, lets say you pay the final £100 off in 20 years time. If you paid that off today with £100 it would cost you £100. If you paid it off it 20 years time it might cost you £50 in todays terms, because the pound will be worth less than the pound today - it might only buy you one Mars Bar than two now for example.

    The alternative, as outlined as an option in the Monevator article is pay it off now (or as much as you can) and then use the "freed up" mortgage payments to add into a pension. The downside with that is opportunity cost, you've lost (say) £50k-£100k compounding over 20 years instead you are trickle feeding it in. You are also, back to inflation again, putting in money thats worth much less at the end than now. One pound now is probably worth an investment of two in 20 years time just to keep even with inflation. So you should pay off the mortgage as late as possible.

    Of course, if your wife will have conniptions every time she sees a headline about the FTSE dropping 1 % today, then maybe for peace of mind, even though in your specific circumstances its pretty much a clear cut bad financial decision, you should pay off a large chunk at least of the mortgage.
    Originally posted by AnotherJoe
    Thanks for your response, my wife would never check these things, so once we invested it I would feel happy we would not even really look at it for 10 years plus as we would have committed to that decision and am aware that the markets go up as well as down and not to panic when its down.
    Time invested etc...


    I think the problem for her and to an extent myself is that most people don't invest and just slave away at the mortgage, most people see stocks and shares and just assume its a massive gamble and they will lose all their money.


    My wife and to an extent myself realise or assume that paying lumps off the mortgage is the number one target. But after reading through this thread it has really tempted me to look into investing instead.


    One question @AnotherJoe is that if I managed to persuade my wife to put considerable sums into S&S ISA, would Vanguard Life Strategy 80 be a wise choice to invest for the long term ?


    Many thanks
    • Anonymous101
    • By Anonymous101 7th Sep 17, 4:09 PM
    • 977 Posts
    • 343 Thanks
    Anonymous101
    Thanks for your response, my wife would never check these things, so once we invested it I would feel happy we would not even really look at it for 10 years plus as we would have committed to that decision and am aware that the markets go up as well as down and not to panic when its down.
    Time invested etc...


    I think the problem for her and to an extent myself is that most people don't invest and just slave away at the mortgage, most people see stocks and shares and just assume its a massive gamble and they will lose all their money.

    Most people are thinking too short term and only listening to the sensational headlines in the news. They don't look at the evidence or work in nearly long enough time frames. If you were investing for a 1-5 year horizon then there's an argument for cash but not for any longer IMO

    My wife and to an extent myself realise or assume that paying lumps off the mortgage is the number one target. But after reading through this thread it has really tempted me to look into investing instead.

    You should. If only to satisfy yourself that the decision you're making is the correct one for you. Perhaps your the type of people that are happy to go against the maths that say investing in equities is the best solution financially in order to gain peace of mind that the mortgage is paid. There is of course a value attached to that peace of mind.

    One question @AnotherJoe is that if I managed to persuade my wife to put considerable sums into S&S ISA, would Vanguard Life Strategy 80 be a wise choice to invest for the long term ?

    Many thanks
    Originally posted by bcfclee27
    That's the fund I'm using instead of overpaying my mortgage so I think that its a good choice.
    I also invest in the Lift Strategy 100 fund with my personal savings. Overall that works out at about a 90% equities proportion.
    • AnotherJoe
    • By AnotherJoe 7th Sep 17, 5:07 PM
    • 7,221 Posts
    • 7,725 Thanks
    AnotherJoe
    I think the problem for her and to an extent myself is that most people don't invest and just slave away at the mortgage, most people see stocks and shares and just assume its a massive gamble and they will lose all their money.
    Originally posted by bcfclee27
    Ah but most do invest (especially nowadays) via their DC pensions, they probably just dont realise it as if you say the word "pension" they glaze over same as if you'd said "let me explain quantum mechanics to you".

    You of course have the luxury of a state backed guarantee without any stock market shenanigans so you do have the freedom to take more risk than the "average" person if you wish.



    Originally posted by bcfclee27
    One question @AnotherJoe is that if I managed to persuade my wife to put considerable sums into S&S ISA, would Vanguard Life Strategy 80 be a wise choice to invest for the long term ?
    Originally posted by bcfclee27
    Its an OK fund. Many like it. It does though (for me personally) have an artificially high UK %, 25% rather than the UK world contribution to GDP which is about 6%. So, given Brexit especially I would say that a lower % is preferable. On teh grounds that if Brexit is a disaster then your funds will do better, if its a success your jobs house etc are secure which is a good trade off for a marginally reduced investment return.

    There are some Vanguard funds that have no UK in them, and others the "average" 6%. personally I'd pick one of those (if you want vanguard, similar are available from L&G, HSBC amongst others), or add an ex-UK (eg excludes UK) fund to lower the UK % you hold overall, but thats wholly a personal preference.

    IMO any of the above would be better than just paying the mortgage off.

    p.s You are giving up tax advantages if you put the money in an ISA instead of a pension. Though you gain some flexibility. If you are a high rate taxpayer then the tax advantage wins out big time.
    Last edited by AnotherJoe; 07-09-2017 at 5:11 PM.
    • barginfinder
    • By barginfinder 7th Sep 17, 11:57 PM
    • 324 Posts
    • 82 Thanks
    barginfinder
    it depends on your mortgage interest rate, because of the tax implications I chose to switch to an offset mortgage, my rate is 1.96% so my emergency fund is reducing my mortgage interest by 1.96% tax free - mortgages are usually the cheapest form of debt so the last to pay off, but using that money in a non cash investment does add risk. The offset mortgage would be a good place to put 20K emergency fund and then you can risk the rest in a S&S ISA or top up your pensions with a SIPP knowing you can't access it until age 55
    I need a better signature
    • Carrieanne
    • By Carrieanne 8th Sep 17, 12:19 AM
    • 63 Posts
    • 58 Thanks
    Carrieanne
    I'd go the Steady Eddie approach during these increasingly chaotic times - 75% of the proceeds to wipe out the personal debts and a nice chunk off of the mortgage to lessen the weight of the debt monkey on my back. The other 25% would be spent on purchasing British gold bullion coins, which are CGT free, as a financial insurance policy.
    • kidmugsy
    • By kidmugsy 8th Sep 17, 12:39 AM
    • 9,596 Posts
    • 6,354 Thanks
    kidmugsy
    The other 25% would be spent on purchasing British gold bullion coins, which are CGT free, as a financial insurance policy.
    Originally posted by Carrieanne
    Hush. Those of us who see merits in some gold sovs are viewed as dangerous heretics or gibbering loonies.
    • barginfinder
    • By barginfinder 8th Sep 17, 1:14 AM
    • 324 Posts
    • 82 Thanks
    barginfinder
    Hush. Those of us who see merits in some gold sovs are viewed as dangerous heretics or gibbering loonies.
    Originally posted by kidmugsy

    is it better to buy the coins or invest in an fund thats based on gold?
    I have one kuggerand bought many many years ago (when I was younger and richer) which has increased in value by about 5X over 22 years - have considered buying more gold but I'm unsure of the best way to do it / store it
    I need a better signature
    • FatherAbraham
    • By FatherAbraham 8th Sep 17, 6:12 AM
    • 737 Posts
    • 561 Thanks
    FatherAbraham
    I'd go the Steady Eddie approach during these increasingly chaotic times - 75% of the proceeds to wipe out the personal debts and a nice chunk off of the mortgage to lessen the weight of the debt monkey on my back. The other 25% would be spent on purchasing British gold bullion coins, which are CGT free, as a financial insurance policy.
    Originally posted by Carrieanne
    "Increasingly chaotic times"?

    In what way are present times more chaotic than the 1930s, the 1950s, the 1970s or the 1990s?

    "the debt monkey on my back"?

    An idiom like that begs the question. Debt currently weighs next to nothing -- its being massively subsidised by savers. Cheap debt is the compensation we're getting for the other bad things which have happened in the economy, and not exploiting it to acquire real assets is illogical.

    "The other 25% would be spent on purchasing British gold bullion coins, which are CGT free, as a financial insurance policy."

    The OP is a police officer, for Goodness' sake. Even the Bolshevik government paid the salaries and pensions of ex-Tsarist police officers who went over to their side. Police officers always get paid.

    Your risk-reduction suggestions are inappropriate and needlessly expensive in this case. The interesting challenge is to increase this family's risk and return, not reduce it.

    Warmest regards,
    FA
    • FatherAbraham
    • By FatherAbraham 8th Sep 17, 6:18 AM
    • 737 Posts
    • 561 Thanks
    FatherAbraham
    is it better to buy the coins or invest in an fund that's based on gold?
    Originally posted by barginfinder
    It depends upon what your goal is.

    If you want an investment, then buy securitized gold, or a derivative thereof. You can hold, buy and sell at close to fair value cheaply, and there's a continuously-quoted liquid market.

    If you want insurance, then hold coins (sovereigns, essentially). You'll need to provide the storage -- either using a local safe, or a hiding place. There's little point in your specie being lodged at a bank's safety-deposit vault when you need to buy transport because the Nazis are coming for your family.

    The two aims are quite distinct, and shouldn't be confused.

    Warmest regards,
    FA
    • bcfclee27
    • By bcfclee27 8th Sep 17, 9:20 AM
    • 52 Posts
    • 7 Thanks
    bcfclee27
    Ok so reading back through the thread, it would seem the majority believe I should use the money either in a S&S ISA or a personal pension.

    If possible could you please recommend a S&S ISA that you would invest in if you were me - I have been investing small amounts already in VLS80 but some don't seem to like the uk percentage involved. So could you pleas give an example of a similar product that doesn't have as much uk but is still as good a product as VLS.

    Also in regards to pensions as I have stated my wife and I already have good pensions but if people feel that I should use the money to enhance these further again any recommendations as what ones to use.
    Also how safe are these pensions ?

    Many thanks for all your help
    • DiggerUK
    • By DiggerUK 8th Sep 17, 9:40 AM
    • 2,742 Posts
    • 2,601 Thanks
    DiggerUK
    ......."the debt monkey on my back"?........Debt currently weighs next to nothing -- its being massively subsidised by savers. Cheap debt is the compensation we're getting for the other bad things which have happened in the economy, and not exploiting it to acquire real assets is illogical........
    Originally posted by FatherAbraham
    Ignoring the fact that cheap debt is the root cause of bubbles in an economy, also means you have to deny that the debt monkey won't turn in to the obese 1000 pound gorilla in the room..._
    I am not now, nor have I ever been, a Financial Adviser.
    Forward, to the 'British Spring'
    • strongboes
    • By strongboes 8th Sep 17, 9:41 AM
    • 82 Posts
    • 57 Thanks
    strongboes
    The expected return from the s&p over the next 10 years is highly likely to be well below historical average, food for thought.
    • DiggerUK
    • By DiggerUK 8th Sep 17, 9:47 AM
    • 2,742 Posts
    • 2,601 Thanks
    DiggerUK
    Ok so reading back through the thread, it would seem the majority believe I should use the money either in a S&S ISA or a personal pension............
    Originally posted by bcfclee27
    Is the majority right though. At the end of the day you will have to hold your own counsel.
    If a gamble on equities is what you fancy, wait until you have funds spare after they become freed up because you don't have a mortgage.
    As to extra pension.....why? what do you need extra pension for. If you feel you do, then again, wait until you have freed up spare cash from not having to pay the mortgage.

    Come hell or high water, you are gonna have to clear the mortgage..._
    I am not now, nor have I ever been, a Financial Adviser.
    Forward, to the 'British Spring'
    • Anonymous101
    • By Anonymous101 8th Sep 17, 9:57 AM
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    • 343 Thanks
    Anonymous101
    The expected return from the s&p over the next 10 years is highly likely to be well below historical average, food for thought.
    Originally posted by strongboes
    Based on what?
    • IanSt
    • By IanSt 8th Sep 17, 9:58 AM
    • 44 Posts
    • 16 Thanks
    IanSt
    You are in the lucky position of having final salary pensions, which if you both keep in your employments will bring in a very good pension when you come to retirement. Given that, and that your wife seems to be low risk, I would think of simply paying down the mortgage but then set up some investments with the monthly money you save on the mortgage. This will reduce the effort you will otherwise need to do to get the money into the ISA (you can only put 20k per person per year), and if there is a stock market fall then you'll be buying more of them per each monthly investment, so your money goes further. Of course the stock market could simply keep on growing, in which case putting all of the money in at the beginning would probably be the best way to invest.
    • FatherAbraham
    • By FatherAbraham 8th Sep 17, 11:06 AM
    • 737 Posts
    • 561 Thanks
    FatherAbraham
    Ignoring the fact that cheap debt is the root cause of bubbles in an economy, also means you have to deny that the debt monkey won't turn in to the obese 1000 pound gorilla in the room..._
    Originally posted by DiggerUK
    Even if it does, the OP will have an index-linked salary, and an index-linked pension, so can afford to risk losing a large proportion of the investment -- the mortgage will get ground down eventually.

    Ideal position to be in, and it would be crazy to throw all that away because of overweening caution. Repaying the mortgage would be bonkers for this scenario.

    Warmest regards,
    FA
    • Carrieanne
    • By Carrieanne 8th Sep 17, 12:42 PM
    • 63 Posts
    • 58 Thanks
    Carrieanne
    "Increasingly chaotic times"?

    In what way are present times more chaotic than the 1930s, the 1950s, the 1970s or the 1990s?

    "the debt monkey on my back"?

    An idiom like that begs the question. Debt currently weighs next to nothing -- its being massively subsidised by savers. Cheap debt is the compensation we're getting for the other bad things which have happened in the economy, and not exploiting it to acquire real assets is illogical.

    "The other 25% would be spent on purchasing British gold bullion coins, which are CGT free, as a financial insurance policy."

    The OP is a police officer, for Goodness' sake. Even the Bolshevik government paid the salaries and pensions of ex-Tsarist police officers who went over to their side. Police officers always get paid.

    Your risk-reduction suggestions are inappropriate and needlessly expensive in this case. The interesting challenge is to increase this family's risk and return, not reduce it.

    Warmest regards,
    FA
    Originally posted by FatherAbraham
    In what way are present times more chaotic than the 1930s, the 1950s, the 1970s or the 1990s?

    Unsure whether that line was typed with tongue firmly in cheek or not. But presuming it was a serious question: world debt is currently 327% of annual global GDP. The means being pursued to reduce the debt load is, er, more debt. Tell me when in the decades you mentioned was the base rate at 0.25% or as prior for years on end at 0.5%? You can't because it had never been since the BoE's inception in 1696. If that fact alone doesn't alert you to that something extraordinary is afoot then I don't know what will.

    Staying with debt, that's what fiat money is. It's also why Russia, China and India continue to buy gold hand over fist. BRICS nations and others know that the petrodollar's days are numbered.

    As for the OP, yes he and his wife have secure employment and pensions, and yes as you intimated they'll always get paid. Though it's not all sunshine and roses because their real incomes have declined for several years thanks to .gov robbing them with their work for less reward scheme.

    The transition to SDRs will be a painful experience when the bubbles, neigh balloons, pop. What will be the needle? That's anyone's guess.
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