What would you do with £30,000?

BilleM_2

Hi there, in desperate need of advice!

We may be given £30,000 next year. I have no idea what to do with it (apart from roll in it and gibber) and need some ideas from sensible people who won't tell me to travel the world and drink posh wine.

We have a £150,000 mortgage and a £5000 loan. I owe about £500 on a credit card and tend to sit in my overdraft by about £300 at the end of each month. Apart from that we break roughly even every month, give or take a hundred pounds.

What would you do with this money?

catchooky

lucky you personally I'd put half toward paying off your debt, ie the overdraft, the loan and towards your mortgage, the rest i'd use for a small treat then save as a rainy day fund
Good luck xx

ermine

we break roughly even every month, give or take a hundred pounds

If you're sitting in an overdraft to the tune of £300 each month then you need to budget and get a handle on your finances first, else the £30,000 which can be a golden opportunity to sort your finances out will end up making the banks richer rather than you and that wouldn't do at all.

So use this year to:

find out how much you spend, and on what
find out how much you have coming in each month
find out what interest rate you are paying on:

• the credit card
• the loan (and can you pay it off early?)
• the mortgage

See if you can trim what you spend so that your spending is less than you earn. The £30k would probably be best used to pay off the credit card and the loan, in that order. You probably then want to keep about 6 months net earnings as an emergency fund, stick that in something like Nations Savings Index-linked certs or a easy-access cash ISA, it wants to be easily accessible in a month but not too easy to dip into

If, once you have paid down your debts you can keep your outgoings less than your income you could consider reducing the mortgage somewhat. If you can't do that then keep trying, as you'll be running the £30,000 down until you do live within your means.

That's one way of doing it, anyway. There are undoubtedly others, but hitting the most expensive (in APR) debt first is a good rule of thumb. However, you do need to learn some financial discipline to make the best of the opportunity.

BilleM_2

ermine wrote: »

So use this year to:

find out how much you spend, and on what
find out how much you have coming in each month
find out what interest rate you are paying on:

• the credit card
• the loan (and can you pay it off early?)
• the mortgage

...

However, you do need to learn some financial discipline to make the best of the opportunity.

I have no idea about interest rates on any of those things. How embarrassing. I only know roughly how much we get in a month, my H's wage changes from one pay cheque to the next and he's paid every four weeks, which can be confusing.

I have no financial discipline. I don't spend wildly, but it always feels shaky iykwim.

Feeling a bit stupid now.

Trazy

Definitely pay off the loan, credit card and overdraft. If it was me getting the money, as I am a soft touch I would probably give it to my son and his young family

smile86

I'd clear the credit card first, then the loan, presuming that any charges dont outweigh the benefits, which they probably wont.

There is a budget calculator on here somewhere if the dipping into an overdraft is a problem, its very good. My non budgeting brain found microsoft excell very useful for month to month budgeting if you know how to set up a spreadsheet (thank you GSCE I.T!)

Then you are just left with your mortgage. Perhaps put some away for a rainy day, and some towards that? and maybe enjoy a little bit.

But most importantly, please don't feel stupid!

ermine

You shouldn't feel stupid. That's being unkind to yourself. There is nothing wrong with knowing you don't know, what is wrong is not then going and finding out, and it doesn't sound like you're doing that at all

Budgeting is the secret to getting this licked. Though it can be tedious at first, the upside is you get more of your money working for you and less of it working for credit card companies and banks, and that means more fun in life with a better and more finacially sustainable lifestyle.

You can find out the interest you are paying on the crdit card from the statements. it is important to compare like with like, look for the key word APR. Credit cards can be from 5% to 20%+ :eek:, loans are usually less, and mortgages usually lower still. Lower is better!

You're in a good position in that budgeting will improve your current situation once you've taken in Martin's budgeting articles. Since it looks like you may be overspending a little bit, a rough guide to start is to try and reduce any fixed outgoings, like Sky TV, mobile subscriptions, magazine subscriptions, gym memberships etc. There's loads of help here on how to reduce lifestyle costs.

By next year you may be in a position for the windfall to clear your debts, build your emergency fund and then think about how you want to use the surplus. Reducing the mortgage does lower your outgoings, particularly with interest rate increases in the offing, but you want to understand your financial position before you take such a step as it is usually not easy to reborrow the overpayment unless you have an offset or flexible mortgage.

DVardysShadow

BilleM wrote: »

I have no idea about interest rates on any of those things. How embarrassing. I only know roughly how much we get in a month, my H's wage changes from one pay cheque to the next and he's paid every four weeks, which can be confusing.

I have no financial discipline. I don't spend wildly, but it always feels shaky iykwim.

Feeling a bit stupid now.

Although you are not in financial agony, I would suggest that you do a Statement of Affairs. Go to http://makesenseofcards.com/soacalc.html.

Doing this SoA will put you in the position of having to answer most of the questions you need to answer, including the APRs on your debts.

As your OH is paid 4 weekly, you need to either multiply the last pay by 13 or more accurately add up the last 13 paydays and in either case divide by 12 to get monthly pay. Although there is an advantage in living the month on 4 weeks pay, which gives you a bonus every time you get 2 paydays between regular monthly payments of any particular bill.

Also, if pay is variable, it is worth finding how much pay in a flat week and calculating your SoA on the basis of a flat 4 weeks, so you are not living on bonus or overtime.

Gordon_Hose

I'd get rid of the debt and put the rest in a high interest account.

Oneday77

I would say pay off the outstanding loans, cc and OD.
Put 14k into your mortgage as it is a sizeable reduction, may shave 2-3years of its term.

The last 10k put 8k into a high savings account with limited access and keep 2k for treats.
It sounds boring but you will reap the benefits long term and not look back and say I wee'd it up a wall with nothing to show for it.

Plus do a SOA anyway to see where you can keep yourself out of the OD and not use a CC for anything.
That way you stay debt free and have more to yourself. Guessing that the £5k loan is over 5 years at £100pm, CC is £20 a month and your bank charges say £10 for teh OD.
You will be £130 a month better off straight away.

dreamdreamer

Personally I would pay off the CC, overdraft and loan. Then put £20k towards the mortgage. The overpayment calculator says this can take up to 5.5 years off a 25 year term.