21 year old recently Inherited 7 figure sum - advise?

Aegis

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.

This is great advice. In addition to all of this, it's probably worth saying that you have no need to make any quick decisions, as rushing into major financial decisions is usually far worse than taking your time. Work out where you will be after graduation before buying a property, for example.

I'm a big advocate of paying down debt early, but student debt tends to be something of an oddity in that it is generally cheaper than most other debt and can theoretically be written off later in life with no issues - this decision needs some further thought before proceeding, however if you plan to live and work in the UK it probably makes sense to pay off student debt rather than investing unless you have a very speculative outlook on investing.

BrockStoker

Be weary of "friends" who ask for a loan or suggest that they have a "great" investment idea. If you must lend, see a solicitor and have them draw up a document that your friend has to sign. If you must invest in a friend, have them draw up a business plan which you can discuss with your IFA.

Good luck!

enthusiasticsaver

Congratulations on your windfall and it is wise for you to be cautious if you are unfamiliar with dealing with large amounts.


I would suggest that you look for a reputable solicitor for doing a will and an independent financial advisor for the sort of money you are talking about.


Personally I would not rush to pay off your student loan until you have left Uni and are working. Payments are calculated on your earnings not overall wealth and the interest charged will be low at the moment.


Your priorities at the moment seem to be a house and a car. I would also suggest you go for a second hand car if it is your first one and how much you spend on it really depends on how much you will use it and whether you need it for long journeys or just a general run around. How much you spend on a house depends on where you will end up living when you graduate and the size and area you live in. Think about maintenance (ie council tax bills, utilities etc) when you are buying it or that could eat into any income you earn from your investments. How much you spend depends on the above.


At some point you may want to think about a pension from a tax efficient point of view but a financial advisor can talk to you about that. Make sure you go for one where you just pay a one off fee, not a percentage of your investments.


I would take some time to do some research and think about what you want to do with this money long term rather than rush into decisions immediately. Make sure for now it is either in National Savings or spread across several financial institutions as it is too large to be covered by the savings guarantee which I think is now £75000 per institution but other wiser people than me may correct me.

Bazofts_Revenge

No need to tell an adviser it is 7 figures go to them with 100,000 and see what they suggest you can always give them the full story later. Also no real need to buy straightaway. unless you have a lot of stuff be a nomad for a while and make short term lets in various places and see where you may want to live. At 21 you certainly don't need to be tied down with a property that may not sell that easy.

Dird

Lornally wrote: »

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.

In that case you could probably buy a flat in London near your uni, maybe a 2 bed and rent out the other room for £250/week or whatever the costs are like there. I don't know where you are but this is the following for Queen Mary uni:
2 bed flat within 1 mile: £350k
Legal & SDLT: about £10k
1 room rent: £160-200/week...you could probably charge the higher end because they share kitchen/bathroom with less people...you'd get £7.5k/year of this tax free, 12 months pretty much covers the purchase costs

2-3 years down the line when you've graduated you could sell...with the way London prices are going you'll probably sell for more than the £350k. Then if you're not from London you could use some of the money to buy a house in your hometown & invest the rest, or just invest all of it & going traveling on the interest

The 3% I was referring to would be a modest return from investing most of it in funds but buying a flat & renting a room would be a much better short term investment. You could do a split like:
£400k - buy & furnish flat/house - room rent of maybe £10k/year
£575k - invest in income generating funds - a 3% income return would give you £17,250/year but there would be some withdrawal charges
£5k - buy a German car
£20k - bank account savings for easy access

IFA/loading charges might eat up some of the money but not much. I imagine an IFA charges a one-off fee like a mortgage adviser, if they're talking about annual charges I'd avoid.

boliston

a "7 figure sum" could range from £1,000,000 to £9,999,999 which is quite a big difference!
The lower figure would probably get you a reasonable 2 bed flat in London but you would not have much change for a car

Dird

boliston wrote: »

The lower figure would probably get you a reasonable 2 bed flat in London but you would not have much change for a car

Depends on the area, maybe not Harrods but Tower Hamlets (near Queen Mary) has a lot for under £500k...most London flats at the "lower end" look like you'll lose your life getting shanked in the lift though, I blame Kidulthood

kidmugsy

BrockStoker wrote: »

Be weary of "friends" who ask for a loan or suggest that they have a "great" investment idea. If you must lend, see a solicitor and have them draw up a document that your friend has to sign. If you must invest in a friend, have them draw up a business plan which you can discuss with your IFA.

Good luck!

Don't lend to friends if you wish to keep them as friends. And for God's sake don't tell anyone how much you've come by.

redux

BrockStoker wrote: »

Be weary of "friends" who ask for a loan or suggest that they have a "great" investment idea. If you must lend, see a solicitor and have them draw up a document that your friend has to sign. If you must invest in a friend, have them draw up a business plan which you can discuss with your IFA.

Good luck!

Tell them how to apply to go on Dragons Den, which is one place where they can find investors with experience of helping develop businesses.

patanne

kidmugsy wrote: »

Don't lend to friends if you wish to keep them as friends. And for God's sake don't tell anyone how much you've come by.

This is extremely good advice. If you, for example, buy a flat and want a lodger because you don't like living alone, try something like a family member is letting you have it for a smaller than usual rent. And to emphasise what others have said make sure that you look for and INDEPENDENT financial advisor. The independent bit is very important!