The Windfall Diary

WindfallWinnie

And no, this isn't about what you should do with a load of leftover apples, but (hopefully) a diary outlining what someone actually does with a cash windfall.

Some background details:

I have been on the MSE forums for a few years but wanted to make this a fresh link, so have adopted a new username.

Because everyone's circumstances are different (amount of o/s debt, mortgage, dependants, etc) some basic biographical detail:
I'm 47, hubby is 59 and we have 2 children aged 14 & 18.

Before the windfall our o/s mortgage was £56,500 on a fixed rate of 3.79%. We also had a couple of long-standing credit card debts totalling about £8,000.

Our windfall came just a couple of weeks ago (Happy New Year!) and totalled £381,000 give or take the odd £.

My immediate reaction was: mild panic (seems odd but it felt quite worrying to have that amount of money sitting in the current account) combined with not worrying if I spent more than £4 on a bottle of wine...

Then I paid off all but £500 off the mortgage (to avoid redemption penalties) and the credit card debts. That was a nice feeling if a bit innocuous cos I do all my banking online. Imagine it would have felt much nicer to have gone into a branch with a cheque.

I opened an AA internet savings a/c and sent off a cheque for £220,000. Another scary few days (hubby pulling out what hair he has left) until that cleared. It only pays 3.2% gross but is better than nothing.

The rest is sitting in my savings account earning next to nothing - 0.05%.

We have an IFA coming today to help us decided how best to invest...

Hubby is quite conservative in his approach & just wants to invest it all for the future. I want to see a bit of the world before we're (he's) too old/infirm to enjoy it (pessimist!)

The aim of this diary is to see what happens to the windfall & how/if it changes us.

le_loup

Oooooh can't wait!
Bet you send "round robin" Christmas cards.

ktk

Looking forward to reading this Winnie. I am in a similar situation, although the windfall is not nearly as big at the moment, but will be in five year's time (terms of the will). Very interested to compare what your IFA and mine suggest!

WindfallWinnie

Sounds interesting ktk.

Yep, it will be useful to compare notes. Everyone's circumstances are different which is why I included some bio. e.g. hubby not far off retirement, teenagers will be leaving home soon-ish (hopefully!) & we have elderly parents who depend on us...

Strangely, just before the windfall we discussed what would happen once Child 2 leaves the nest. Neither of us are particularly sentimental about our house/home and we had already decided we would downsize within the next 3-4yrs! Can't imagine that will change but we'll see...

ktk

Hi Winnie.

My circumstances are: I'm 50, OH 47, children 11 and 14. House worth about £350k, outstanding mortgage £70k, current windfall £100k, but can expect at least £250k in 5 years. I am considering extending the mortgage and buying a small investment property, as I can't think of another way to gain a good return in the current market. I will be in a position to pay off the mortgage in 5 years, and will own 2 properties outright. We'll see if I lose my bottle!

Vortigern

Can't help feeling that £220,000 is too much to put in one bank. What if the AA (or its host bank) were to go bust?

atush

Ok, first off. Your 220K is outside the safe FSC protection of 170K for a joint acct. So i;d open another inanother bank and put the overage and some of the money in your current acct in that.

I'd open 2 cash ISAs, one in each of your names. And while you are at ti, one for the 18 yr old and junior ISA for the 14 yr old. This will have the effect of sheltering some of your interest fromt he taxman who will now become your biggest bugbear. I assume you won't be stopping work yet, as that isn't enough to live on long term at todays rates. If you are worried abt the 18 yr old spending it, set it up as a fixed rate for several years. You will want to keep opening new ISAs each april.

Have a look at NSI productsfor further cash savings (as they are tax free). Resist the IFA if wh wants you to put most/all of it into some structured product that will pay him a big fee.

Pesnions. Do you have one? If not, get ones going (for all 4 of you- any non working can have stakeholders) as you will save on tax. The interst from this could in fact push you up into a higher tax bracket. If you already have one, make a lump sumpayment into one. Tax reief will boos your contribs nicely. This also means that you won't 'run thru' the money even if you are tempted as you can't access it til age 55.

Get back to us once you have seen your IFA. And I hope it is an IFA, and not an FA from your bank??? Aviod one from your bank like the plague. If you don't knwo a good one, use unbiased.co.uk.

WindfallWinnie

Vortigern wrote: »

Can't help feeling that £220,000 is too much to put in one bank. What if the AA (or its host bank) were to go bust?

I know about the safe limits but I wanted to put some of it somewhere it would be earning interest until we saw the IFA.

After today, I'm guessing it will be moving on...

WindfallWinnie

atush wrote: »

Ok, first off. Your 220K is outside the safe FSC protection of 170K for a joint acct. So i;d open another inanother bank and put the overage and some of the money in your current acct in that. See above. Plus, its in my name cos hubby is HR tax payer... Hmm, more than an indecent amount of 'running away money'. (Only kidding)

I'd open 2 cash ISAs, one in each of your names. And while you are at ti, one for the 18 yr old and junior ISA for the 14 yr old. This will have the effect of sheltering some of your interest fromt he taxman who will now become your biggest bugbear. I assume you won't be stopping work yet, as that isn't enough to live on long term at todays rates. If you are worried abt the 18 yr old spending it, set it up as a fixed rate for several years. You will want to keep opening new ISAs each april. Cash ISA rates seem horribly low but I'm sure its something we'll do. 18yr old is on DLA so am wary of building up too much in way of savings. Will check out junior ISA rates for 14yr old. Hubby will not be stopping work yet - not much point until 14yr old leaves school...

Have a look at NSI productsfor further cash savings (as they are tax free). Resist the IFA if wh wants you to put most/all of it into some structured product that will pay him a big fee. We've known the IFA for a few years - he's been looking after hubby's pension & some other investments. He's up-front about fees, etc.

Pesnions. Do you have one? If not, get ones going (for all 4 of you- any non working can have stakeholders) as you will save on tax. The interst from this could in fact push you up into a higher tax bracket. If you already have one, make a lump sumpayment into one. Tax reief will boos your contribs nicely. This also means that you won't 'run thru' the money even if you are tempted as you can't access it til age 55. Hubby has pension & suspect IFA will suggest putting lump sum in, altho' hubby moans about not being able to access it. I had a pension 20yrs ago but stopped paying in regularly when I went PT. Will ask IFA about this & children.

Get back to us once you have seen your IFA. And I hope it is an IFA, and not an FA from your bank??? Aviod one from your bank like the plague. If you don't knwo a good one, use unbiased.co.uk IFA is a nice guy - see above. [/QUOTE]

Thanks for all your useful comments. I will make a note & see what IFA says.

atush

Ok, if the accts are to be in your name only, open 4 lol. You need to have 85K or less in each. And that means each insititution with a seperate license as someshare one.

Check with the benefits office, but I think up to 6K will NOT affect your childs DLA. But the limits could be higher. So get them an ISA too.

ISAs can be 3% or more. So check for the best rates and open them. Dont forget you will lose 20% or more of your interest at AA to tax!

Sounds like you are set with a good IFA. That is half the game right there.

atush

Lets us not forget fun and home.

First on my list would be any maintence or repairs on your home you were saving up for. Do them asap. And then look (if you won't be moving) at any upgrades you may want. Start planning and seeing abt the costs. This is money you will wat to set aside and as it will improve your home's value isn't really a waste).

Cars. If any are getting on, good time to think of replacing them. Dont forget to ask for Cash Discounts (I do this even when buying more than one white good) and look at buying almost new (ie demos). Never be afraid to haggle if you have cash in the bank. If they won't give you one, pay with the cashback credit card you will have just opened. That will cost them and you will still get a discount ;-) Given you have paid off CCs I would look for the best ones for people who don't carry a balance. For me that means ones that give you cashback, extra tesco points, free flights etc.

Plan a nice little holiday (or a slightly bigger one-took my 3 boys on a caribbean cruise when I had a windfall).

If this was an inheritiance, do something like even just having a drink of champagne and toasting them to making a small gift to charity in their name.