Just got a largish windfall - what's the best thing to do with it?

PaulJM

Hi All,

I've been lucky enough to have recieved an insurance pay-out of £75,500, and wondered what the money savers would suggest is the sensible option to make sure it works for me.
The money has come from a critical illness policy which I took out against an old mortgage - I never take these things out, but I must have forgotten to cancel this one(!?!). I've been unlucky enough to have needed a major heart operation, but it's done now, and hopefully I've over the worst.

Here's some stuff about me, so you can suggest away!

I give plenty of money to charity through Give as you earn, so I'm inclined to use this money personally, instead of giving a lot more away (sounds tough, but there you go)

Our house has a £120,000 mortage, and well in equity. It's a bit tired, but nothing structural needs doing. I guess I'd like to sort the garden and look at a loft conversion, but none of that is critical.

I have two children who might need uni fees, starting in about 6 years!

I have some debt - about £1500 on overdrafts, which I was clearing, so will do straight away now, and about £2500 on an interest free card, which is due to go interest bearing before Xmas.

I have two cars, and we need both, both run ok but both have over 100k miles on the clock. No loans.

Work is fine, I'm paid in full until I go back, and I will be going back shortly.

I'd like to enjoy SOME of it, as the last few months has been awful, but I want to see some lasting benefit from it!

tleefox

Difficult to give "the right" answer as it is dependant on you as a person and your own personal attitiude to spending etc. BUT, this is what I would do if I was in your shoes:

1. First off I would clear your debts i.e. the overdraft and the CC, which would leave you with £73,500.
2. Secondly I would scour the market for the highest fixed rate savings account for 5 years to put some money away for your children's assumed university fees (how much is up to you, but I would probably put away £35k). A quick search on moneysupermarket brings up a 5.05% account if you fix for 5 years, but I would have thought there are MUCH better options out there. This would leave you with £38,500.
3. Depending on how keen you are for the loft conversion, I would do this now whilst you can pay cash. If done right, this will increase the value of your home. Given the nature of the construction industry at the moment, assume a good conversion done correctly will cost anything between £10k - £15k, leaving you with between £23,500 and £28,500.

Those are the 3 main things I would do - I wouldn't bother with a new car unless you need one as they are the worst type of investment. I would probably have a holiday and put some away for a rainy day too (like when the car dies!)

Enjoy!

dave82_2

"Given the nature of the construction industry at the moment, assume a good conversion done correctly will cost anything between £10k - £15k"

Think you are looking at quite a bit more for this unless it is really basic.

2sides2everystory

You seem like a classic example of someone that could perhaps use an offset mortgage or "one account".

Clearly there's not much point in saving £73,500 if you are still borrowing £120,000 at a higher rate.

What is the interest rate on your mortgage? Is it fixed/tracker/interest only ?

I think perhaps you might "enjoy" some of the disposable income that it potentially frees up as opposed to blowing any significant chunk of the capital.

That means you can afford to tidy up the place but unless you are crying out for extra space will teenage kids really appreciate and use the space that a loft conversion gives now? Six years and they are potentially only there for high days and holidays.

Alternatively, does this extra capital give you or your partner the chance to try out a new business idea as entrepreneurs? They say now might be the time although we don't want to put your recent surgery to any heavy stress tests just yet I am sure

Good luck with the return to work - I think in your place I'd take tleefox #1 advice and instantly get rid of the short term debt, but then simply rearrange things a bit to make sure I was at least using the money to reduce my mortgage interest by 73500/120000 although I wouldn't instantly give up the ability to borrow up to £120,000 again which is why I mentioned offset or "one account".

I'd also congratulate myself, and feel quite pleased about coming through the tough patch reasonably well ahead . It is difficult to imagine the trials of a health problem like that and being part of a still young family unit and all.

Clearly the whole family will have earned a good holiday and so I think anyone might agree that a small chunk of it could be used on a great summer 2011 deal.

After that, you've basically now got a £50,000 mortgage and kids to get through university.

I am only a four years ahead of you in that department and I still haven't a clue what university will cost now they've blown the fees thing wide apart.

I am kind of hoping my kids might see some benefit in going to Europe to study but I shan't push it. I certainly cannot stomach the idea that they should be taught that £40K each in debt at age 21 is the way to go. I'd rather pay it myself and risk debt into old age. What a message to teach them, eh? "Debt doesn't matter - you might never have to pay it back."

I reckon we elders can handle debt better than any 21 year old

Enjoy a bit of it and congratulations on getting through it all .

PaulJM

Cheers all,

This is good advice, I tend to need to listen to the angel on my shoulder before the devil on money related matters, so I can make myself feel appropriately guilty

I'll probably save a load for the kids and rainy days, do a bit to the the house and sort the bits of debt. And then have a holiday!
Although it's completely sensible to pay some of the mortgage, and I get the point that I might be paying 6% on a mortgage and earning 5% on savings, but it's too sensible for me. If it was double the amount, I think I would use a load for that.

Thanks again!

Primrose

Only one thought about your loft conversion. If your kids will start going to university in only six years, would spending money on a loft conversion really be good value.? You won't have many years enjoying it before your kids have virtually flown the nest and then your house will probably feel large enough and empty, even without additional loft space.

I'd certainly clear your debts and put around half of it away towards university fees. If you and your wife use your annual Cash ISA allowances, between you, you can put away £10,000 plus every year to protect the interest from tax. I'd put between £5K & £10K into an instant account for your "pleasure/leisure" use, and perhaps use the rest of it to reduce your mortgage.

It depends how secure you feel your job and future health is likely to be. If you're worried about either of these, , you may want to use more of the money now to reduce more of your mortgage debt.

whatyadoinsucka

i recently inherited some cash i invested some of it into Shares (MRW ticker) sold out after 2 days for a 2.5% profit
i should have kept as would be making 9-10% now.

anyway i paid down on the mortgage and feel better for it, yes i could have made more elsewhere but my mortgage now seems like a small amount so i will chip away at it even more to get it to zero..
then we'll be cash rich..

soulsaver

I've been there.... so I can say: You've made a will?
Stay lucky & healthy:)