What should I do with £50K?

bobson_2

I've been trying to word this in such a way so as not to appear smug. I apologise if I come across as such.

I dont have much in the way of debt - I have student loans totalling £15k, and a £1000 credit card debt (10 month 0% credit card - my first and only credit card, and only obtained to buy a laptop). I'm not worried about the credit card as I've budgeted to pay that off. Likewise with the student loans - this is being taken from my salery at source. I started my degree in 1998, so was amongst the first year to be hit by tuition fees - but they dont cause me too big an issue.. although I wish I hadn't wasted the money on a degree... but thats an entirely different topic.

Since graduating I've had a string of naff jobs to suppliment my income as a freelance illustrator/designer, but a few weeks ago was head hunted by a design firm who like my stuff. I've been given a salery of £25k per year, and have been told that next year I could be on more.

This week I also inherit at least £50k - tax free.

What should I do with it? Sounds crazy I know, but I honestly havn't any idea. For the first time ever I'm earning a good income, doing a job I like without having to deal with target orientated, paper pushing, power suit plonkers. My salery takes care of all I need.

I drive a 10 year old banger.. I dont own a house (currently renting). I've £1000 on that interest free card.. I'm not married, dont have children, and dont have anyone dependant on me. Thats basically my situation.

I dont need the £50K for anything as such.. it would be nice to have a new car.. but I dont really need one. I've been advised by a mate of mine to buy a house with it - but with interest rates set to rise next week.. Would I be better off keeping that £50K in the bank, and making it grow, and then doing something with it?

cheerfulcat

It's not going to grow an awful lot if you keep it in the bank.

Alison_B

I am in a similar situation to you. I inherited £58,000 last year but I have got to pay £8,000 in tax. Mine is just sitting in the bank at the moment.

I would definately look at buying a property rather than just renting as that is just dead money down the drain. You can probably pay a mortgage for what you are paying on rental and you will have something at the end of it.

You said that you have got a good job and that the pay will be even better next year, so why don't you treat yourself to a nice new car - if that is what you want. Enjoy it. I would also pay off my loan if I was you.

Goodluck with whavever you decide to do with the money and hope things continue to get better for you.

Cypher

so why don't you treat yourself to a nice new car

Sorry as a newly reformed tight wad and general money saver, I'm not into the “new” car option, I’ve been stung with that one too many times. Yes we all need a car and the odd treat would be really nice, but this is a MoneySaving board and there is no quicker way to loose money than watching it depreciate as you drive it off the forecourt If a car is what you decided to buy then I'd look at buying a slightly older better car that’s already lost most of it money. Preferable checking for cars that depreciate at a slower rate than the norm.

rjm2k1

It won't grow much in the bank as you will be paying income tax on the interest. You can put it in ISAs, but you are only allowed to put 3k a year into a mini cash isa, there are also maxi isas into which you can put around 7k, but either way, it's going to take a while to make it all tax free. Property would be my suggestion, with a deposit like that, a suitable house for a single guy would mean that more of your income would become disposable, you can overpay the mortgage until you actually need to do something else with your salary, by which time you should have fairly small mortgage.

Alison_B

Cypher wrote:

Sorry as a newly reformed tight wad and general money saver, I'm not into the “new” car option, I’ve been stung with that one too many times. Yes we all need a car and the odd treat would be really nice, but this is a MoneySaving board and there is no quicker way to loose money than watching it depreciate as you drive it off the forecourt If a car is what you decided to buy then I'd look at buying a slightly older better car that’s already lost most of it money. Preferable checking for cars that depreciate at a slower rate than the norm.

New doesn't necessarily mean brand new but new to him - that is what I meant.

bobson_2

Thankyou for the advice :-)

I'm not too worried about the student loans because the interest is so very little - its also not secured on anything, comes out at source - if I'm made unemployed, the payments stop till I start work again with no real impediment. The credit card on the other hand.. well if I miss a payment interest is applied, and if I dont pay it off they can take me to the cleaners.

Property does make the most sense. Houses can be bought for around 90K where my job is (It's in the midlands, and much cheaper than the south) so a friend of mine has advised I do the following:

Buy two houses, placing a £20K deposit on both of them, and taking out a £60K mortgage on both. Live in one, and let the other.

Property 1 - let this property to gain an income, and only ever pay the interest on this mortgage.
Property 2 - live in this property, and pay its mortgage in full with the income from property one.

Property 1 should then be paid for with the income of property 2 (provided I have a regular tenant of course). Eventually sell property 2 - the mortgage lender will take whats owed to them, and I will take back my initial £20K investment, possibly more. So in effect I've bought a house and only used £20K of my cash, kept the other £20k and got someone else to pay my mortgage..

I will then have £20K of free cash to do the something else with.

Does that sound like a plan?

ReportInvestor

It is a plan.

But earlier you were worried about rising interest rates on one house.

And now you plan to buy two ?

It might work out well. But if it were me I'd buy the one house and start to invest some of the money I saved on rent to diversify, thereby reducing risk.

Tom_Jones

In this day and age I would say go out and enjoy it, not drink yourself stupid, but take decent holidays, weekends away, buy a decent car etc, you are making a decent enough living to afford a house at a later date.

consultant31

Buying to rent can be very soul-destroying.
We used to have some terraced houses which we rented out, but several of the tenants were dreadful, and when they moved out, it cost loads to get the house back into good enough order to re-rent.
1. We had an exterior door kicked in when the husband was locked out by the wife for some misdemeanor.
2. An internal door taken off and used as firewood, when they had no money to keep warm.
3. An internal wall knocked down when the tenant wanted to be able to get through to the neighbour (his brother) without going round (yes, honestly!)

Of course, there are some excellent tenants, but if you get a bad one, heaven help you.
In our case, the entire street has recently been knocked down for a new by-pass and we didn't do too badly out of the compulsory purchase, but we wouldn't buy to let again, it's too stressful.

immoral_angeluk

You can give it to me if you like...