21 year old recently Inherited 7 figure sum - advise?

Lornally

Hello all, hope you're having a nice day.

I won't go into too much detail. I don't have much knowledge on this subject and not sure where to begin but I do know I'm incredibly lucky to be given this opportunity at a young age. I want to be able to live off of this and not have financial difficulty in future.

A little about me: I'm at university (studying engineering if this matters at all) and have lived independently for a few years, I have no major commitments; no children/no partner. My utility and mobile bills are as far as financial commitments go for me. I'm not on the best terms with my family and don't want to discuss anything with them.

I've never in my life had access to anywhere near this much money and hope you guys could help point me in the right direction. I have quite a few questions:

1) Do you need a lawyer? if so, where do I find a trustworthy one, and does it need to be a particular type of lawyer?

2) I want to make this money work for me. I don't have a desire for expensive/ luxury goods and don't want to change the way I live in a major way. I'd like to own my own home and have a decent car though. What percentage should I allocate to investing / spending on the car/home - and should I pay upfront or take out a mortgage?

3) Investments. I really don't know much about investing but I'd like to treat monthly returns from investments as a type of salary and use that instead of the actual capital. What are the safest types of investments to provide a comfortable return? Am I supposed to contact investment banks or private banks?

4) I've heard financial advisors are pretty crucial, but have no idea where to find these either, how do I find a reputable professional who knows what they're talking about?

5) Student debt. The only debt I have is my student loans and it will be somewhere in the region of about 60k by the time I finish. Should I pay this off in full immediately?

6) More on investment. Should invest in property? Are stocks the only other major investment method? Are there others? How can I make this money last for as long as possible, living a regular life?

I'm sorry if these questions sounds stupid or really obvious, I genuinely don't know what to do, and I'm essentially alone and can't really talk to anyone else about this. I know

bowlhead99

Lornally wrote: »

1) Do you need a lawyer? if so, where do I find a trustworthy one, and does it need to be a particular type of lawyer?

Not really. You don't have any problems with the law. You have problems with needing unbiased advice about your financial situation and the options open to you. So the type of professional you need is an independent financial adviser.

You can access a list of IFAs at unbiased.co.uk. For most people it is good to get one through a personal recommendation. However as you don't speak to your family, and your typical university-age peer group does not employ IFAs (or if they do, do not have decades of experience of knowing whether the adviser was actually any good), you may struggle on this point so it is a bit like sticking a pin in a phone book. Go and have a (free) chat with at least 3 that you like the look of to see what they offer.

The only thing you might want a lawyer/solicitor for is helping with a will, given you have decent assets and no partner and don't like your family. If you were to die intestate (without a will) your assets will go to your parents with whom you're not on the best terms. So you may prefer to name friends or charities in your will.

You will meet a solicitor when you try to buy a house. Again you can find one using recommendations or unbiased directory listings (there will probably be some on the high street nearest you, with websites and maybe even 'independent' reviews here and there).

2) I want to make this money work for me. I don't have a desire for expensive/ luxury goods and don't want to change the way I live in a major way. I'd like to own my own home and have a decent car though. What percentage should I allocate to investing / spending on the car/home - and should I pay upfront or take out a mortgage?

Buy a decent second hand car. It costs what it costs. We don't know whether to you, a decent car is £10k or £30k. You probably don't need a £30k car to get to uni if you don't currently have one and don't want to change your lifestyle much. There will still be a lot left from your 7 figure sum.

Buy a home that will suit your needs where you're currently living and be future-proofed a bit in case you decide that the city where you're at uni is in fact the city that you'll want to live in for several years beyond. You don't have to buy a "forever home". There is no 'how much to spend' because the amount is different in London vs the cheapest city.

If you're willing to share, you can always put housemates in it and get some income to offset the cost of the mortgage. Mortgages are cheap and you can get an interest rate fixed for a few years at very low rates if you pay for half the home in cash and only need a mortgage for the other half. That keeps much of your wealth available for investment.

However depending on how much you are borrowing, if you have no actual job or ongoing fixed income and don't intend to let out any rooms in your home, you may struggle to get the usual high street lenders to lend large sums to you because they usually like to lend an amount related in some way to a multiple of ongoing job income or rental income. So don't assume you can borrow 95% no questions asked just because you have a lot of cash in the bank. But there is no need to borrow anything like that much.

3) Investments. I really don't know much about investing but I'd like to treat monthly returns from investments as a type of salary and use that instead of the actual capital. What are the safest types of investments to provide a comfortable return? Am I supposed to contact investment banks or private banks?

The aforementioned independent financial adviser from (1) above will advise you on constructing an investment portfolio that matches your goals. Don't just blindly go to a bank and ask them how they would like to spend your money on the products they choose to offer.

4) I've heard financial advisors are pretty crucial, but have no idea where to find these either, how do I find a reputable professional who knows what they're talking about?

See (1) above

5) Student debt. The only debt I have is my student loans and it will be somewhere in the region of about 60k by the time I finish. Should I pay this off in full immediately?

While you are studying the student loan rate is inflation plus about 3%. It is more expensive than a home mortgage but cheaper than other sorts of loans that people without salaries can get.

If you then graduate and become a low earner it gets pegged back to just inflation until you start earning more and you can defer paying it off (or maybe avoid paying off forever) if you are always a low earner. Most people don't really aspire to be a low earner. So although it can be a source of cheap finance for a lot of people, it is not finance that you really need because it seems a bit of a risk to borrow 60k at inflation plus 3% and then hope to invest the extra money you're left with to try to return inflation plus more-than-3%.

So, paying the loans off seems reasonable but maybe if you are unsure, keep the loans you've got and don't take out any new unnecessary ones.

6) More on investment. Should invest in property? Are stocks the only other major investment method? Are there others?

There are lots of ways. Generally investment funds that invest in a portfolio of stocks, company and government bonds, and real estate, are the most popular. Your own residential property will be a form of investing in something. But getting a second and trying to become a professional landlord while you are also trying to get a decent engineering degree is a bit ambitious and buying an investment property is a lot more 'eggs in one basket' than investing in a diversified portfolio of funds.

See (1) above.

How can I make this money last for as long as possible, living a regular life?

Invest wisely (seeing (1) above) and get a part time job during university like other regular people, and after you graduate get a normal full-time job to the best of your abilities. Use the income from that job to live a regular life. Then the income from your investments can just be reinvested because it is not being spent, and will last until infinity.

If you draw money out of it each year instead of getting a job, or just keep it in cash so its value is eroded by inflation, it will last to less than infinity.

Dird

Where are you studying? At 21 you should be graduating soon; do you plan to live there after or move back home/elsewhere? If you plan to move after graduating then no point buying in your current location

Cars: you can get quite nice looking 2nd hand cars, guy I know got this for about £7k - https://scontent-lhr3-1.xx.fbcdn.net/hphotos-frc3/t31.0-8/10896390_10152921072974123_8268683769301933898_o.jpg

If you want it as income, £1 mill returning 3%/year would give you £30k to live off. Mortgage free & outside London that would be comfortable to live off. You could probably switch between different Eastern European/Asian countries each month if you wanted with that income

Sam_J12

Spend a bit of money getting financial advice - this is too much money to risk on silly mistakes due to your inexperience. Then do a lot of reading about investing - I am sure you will be more than smart enough to get to grips with it quickly if you are doing an engineering degree. I would recommend a collection of Warren Buffet's essays to get started as they are truly excellent and you will learn a massive amount about investing and business in general ( http://www.amazon.co.uk/The-Essays-Warren-Buffett-Corporate/dp/1611634091 ). Once you are comfortable that you know what you are doing then you can start making more decisions for yourself.

And congratulations.

le_loup

Another weekend. Another 21 year old with unbelievable good fortune. Another young man with no help or guidance. Another first time poster with major problems.

Lornally

bowlhead99 wrote: »

Not really. You don't have any problems with the law. You have problems with needing unbiased advice about your financial situation and the options open to you. So the type of professional you need is an independent financial adviser.

You can access a list of IFAs at unbiased.co.uk. For most people it is good to get one through a personal recommendation. However as you don't speak to your family, and your typical university-age peer group does not employ IFAs (or if they do, do not have decades of experience of knowing whether the adviser was actually any good), you may struggle on this point so it is a bit like sticking a pin in a phone book. Go and have a (free) chat with at least 3 that you like the look of to see what they offer.

The only thing you might want a lawyer/solicitor for is helping with a will, given you have decent assets and no partner and don't like your family. If you were to die intestate (without a will) your assets will go to your parents with whom you're not on the best terms. So you may prefer to name friends or charities in your will.

You will meet a solicitor when you try to buy a house. Again you can find one using recommendations or unbiased directory listings (there will probably be some on the high street nearest you, with websites and maybe even 'independent' reviews here and there).

Buy a decent second hand car. It costs what it costs. We don't know whether to you, a decent car is £10k or £30k. You probably don't need a £30k car to get to uni if you don't currently have one and don't want to change your lifestyle much. There will still be a lot left from your 7 figure sum.

Buy a home that will suit your needs where you're currently living and be future-proofed a bit in case you decide that the city where you're at uni is in fact the city that you'll want to live in for several years beyond. You don't have to buy a "forever home". There is no 'how much to spend' because the amount is different in London vs the cheapest city.

If you're willing to share, you can always put housemates in it and get some income to offset the cost of the mortgage. Mortgages are cheap and you can get an interest rate fixed for a few years at very low rates if you pay for half the home in cash and only need a mortgage for the other half. That keeps much of your wealth available for investment.

However depending on how much you are borrowing, if you have no actual job or ongoing fixed income and don't intend to let out any rooms in your home, you may struggle to get the usual high street lenders to lend large sums to you because they usually like to lend an amount related in some way to a multiple of ongoing job income or rental income. So don't assume you can borrow 95% no questions asked just because you have a lot of cash in the bank. But there is no need to borrow anything like that much.

The aforementioned independent financial adviser from (1) above will advise you on constructing an investment portfolio that matches your goals. Don't just blindly go to a bank and ask them how they would like to spend your money on the products they choose to offer.



See (1) above



While you are studying the student loan rate is inflation plus about 3%. It is more expensive than a home mortgage but cheaper than other sorts of loans that people without salaries can get.

If you then graduate and become a low earner it gets pegged back to just inflation until you start earning more and you can defer paying it off (or maybe avoid paying off forever) if you are always a low earner. Most people don't really aspire to be a low earner. So although it can be a source of cheap finance for a lot of people, it is not finance that you really need because it seems a bit of a risk to borrow 60k at inflation plus 3% and then hope to invest the extra money you're left with to try to return inflation plus more-than-3%.

So, paying the loans off seems reasonable but maybe if you are unsure, keep the loans you've got and don't take out any new unnecessary ones.

There are lots of ways. Generally investment funds that invest in a portfolio of stocks, company and government bonds, and real estate, are the most popular. Your own residential property will be a form of investing in something. But getting a second and trying to become a professional landlord while you are also trying to get a decent engineering degree is a bit ambitious and buying an investment property is a lot more 'eggs in one basket' than investing in a diversified portfolio of funds.

See (1) above.
Invest wisely (seeing (1) above) and get a part time job during university like other regular people, and after you graduate get a normal full-time job to the best of your abilities. Use the income from that job to live a regular life. Then the income from your investments can just be reinvested because it is not being spent, and will last until infinity.

If you draw money out of it each year instead of getting a job, or just keep it in cash so its value is eroded by inflation, it will last to less than infinity.

Thank you so very much for taking the time out to provide such a detailed answer. This'll be incredibly helpful. I'll take on board your advise and will get to finding an advisor as soon as possible. Should I be asking for a reference from a previous client, or is there anything in particular I should watch out for when consulting with them?

Many thanks!

Lornally

Dird wrote: »

Where are you studying? At 21 you should be graduating soon; do you plan to live there after or move back home/elsewhere? If you plan to move after graduating then no point buying in your current location

Cars: you can get quite nice looking 2nd hand cars, guy I know got this for about £7k

If you want it as income, £1 mill returning 3%/year would give you £30k to live off. Mortgage free & outside London that would be comfortable to live off. You could probably switch between different Eastern European/Asian countries each month if you wanted with that income

I'm studying in London and unfortunately no, I wish I was graduating soon lol. I worked for a little bit after my A-levels and have only just started Uni this year. That was the first thing that came to mind, using the interest and travelling, I would love to see the world since I've only left the country once in my life (In France for a few days with school). but having a look at regular bank account/ savings account, the interest rates are no where near 3%, the return would be tiny in comparison to the capital going in, which is why I'm looking at investment. And I was actually looking to spend no more than about 5k on a used car, in my opinion there's no need or justification to spend a ridiculous amount on something that will only lose its value with time

Lornally

Sam_J12 wrote: »

Spend a bit of money getting financial advice - this is too much money to risk on silly mistakes due to your inexperience. Then do a lot of reading about investing - I am sure you will be more than smart enough to get to grips with it quickly if you are doing an engineering degree. I would recommend a collection of Warren Buffet's essays to get started as they are truly excellent and you will learn a massive amount about investing and business in general. Once you are comfortable that you know what you are doing then you can start making more decisions for yourself.

And congratulations.

Absolutely, right now I'm just casually looking online to see if any particular recommendations to come up, but I won't be doing anything drastic until I'm sure and comfortable with the decision. I would love to have enough knowledge to know what to do with money, I never had the need to learn so I'll be doing some catch up. And thank you, I'll have a look at those too, I may not know much about investment, but I know enough to know who Buffet is

Thank you for the kind words.

Lornally

le_loup wrote: »

Another weekend. Another 21 year old with unbelievable good fortune. Another young man with no help or guidance. Another first time poster with major problems.

Not entirely sure what you're implying here, but yes you're right, I've had unbelievably good fortune in this matter, and will be forever grateful, maybe there are others who deserved this more than me, but I'm not going to complain. Last week I remember I didn't have anything to eat as I literally had zero money to buy food after paying for my monthly travelcard+uni textbooks, as I'm sure many students can attest. And now I'm here, I still can't believe it myself. If you're complaining about my posting, isn't this a good thing? This website and forum has so many knowledgeable people participating and a wealth of information that people actually seek to make use of it all. It's a testament to the quality of the forum.

P.s, I'm a woman.

EdSwippet

Lornally wrote: »

le_loup wrote:

Another weekend. Another 21 year old with unbelievable good fortune. Another young man with no help or guidance. Another first time poster with major problems.

Not entirely sure what you're implying here, but yes you're right, ...

le loup is just our resident grouch :-)

JohnRo

The first adviser you see will have flashing dollar signs in his or her eyes so at the very least get a second opinion or two and compare the charges.