Where to put inheritence?

~FlowerPot~

Thank you everyone for your advice we will sort out an emergency 6 month fund. Fill up ISAs
Havent given my pension anything like enough thought. Our basic plan was to buy something and then rent out for some income and then sell to realise money for retirement. But I am getting the feeling on here that investing is prefered to buying property.

atush

Why property?

Do you have skills in the game (ie an estate agent/lettings agent, builder, plumber etc)?

ARe you aware of the upcoming changes re buy to let? In that they are even more tax unfriendly than now?

A pension gets tax relief on the way in. So if you pay BR tax, every 80 you put in becomes 100. That is an immediate boost in value and while in the pension both income and gains are tax free.

BTL is taxed on income (and some things you could deduct like mtg interest are being withdrawn) and gains (capital gains tax). And stamp duty is now far higher.

If and when you need a large sum for something, it is not liquid so you cant get your money when you need it. With pensions, after age 55 you can withdraw funds as needed

Pensions are protected from creditors, property isnt.

steampowered

~FlowerPot~ wrote: »

Thank you everyone for your advice we will sort out an emergency 6 month fund. Fill up ISAs
Havent given my pension anything like enough thought. Our basic plan was to buy something and then rent out for some income and then sell to realise money for retirement. But I am getting the feeling on here that investing is prefered to buying property.

The important thing is to run some numbers using a pension calculator - e.g. https://www.moneyadviceservice.org.uk/en/tools/pension-calculator/info.

It is all very well saying you will buy property, but you need to have a plan for saving enough cash to do that.

Investing in property is fine, but:
1) It is heavily taxed - unlike pensions where you get tax relief.
2) You still need quite a lot of money to do it.
3) Some work/effort is required to manage the let.

trailingspouse

First things first - look at your debts. Cars, credit cards, mortgage. Pay off the ones that have the highest interest rates. You may not want to put the whole of the inheritance in to your mortgage - as others have said, once it's gone it's gone, but as you're currently struggling it makes sense to pay off enough to bring the monthly payments down to something manageable.

Next - savings. A 6-month emergency fund is always a good idea. And it gives you a back up if you suddenly need to replace the car at short notice, or the roof blows off. Then look at putting extra into your pension. Then look at saving towards specific goals - a new kitchen, new car, big holiday, whatever.

Finally, don't say a definite no to stocks and shares. You're absolutely right to be a bit wary - shares can go down as well as up, and you should never invest money that you can't afford to lose. But - the returns can be greater than are available in savings accounts. Read around the subject, talk to people, and don't do anything until you feel confident - but don't discount it entirely.

I think your attitude to the money is commendable - so many people would just spend, spend, spend. I always feel you owe it to the person you inherited from to use the money wisely and well.

~FlowerPot~

trailingspouse wrote: »

First things first - look at your debts. Cars, credit cards, mortgage. Pay off the ones that have the highest interest rates. You may not want to put the whole of the inheritance in to your mortgage - as others have said, once it's gone it's gone, but as you're currently struggling it makes sense to pay off enough to bring the monthly payments down to something manageable.

Next - savings. A 6-month emergency fund is always a good idea. And it gives you a back up if you suddenly need to replace the car at short notice, or the roof blows off. Then look at putting extra into your pension. Then look at saving towards specific goals - a new kitchen, new car, big holiday, whatever.

Finally, don't say a definite no to stocks and shares. You're absolutely right to be a bit wary - shares can go down as well as up, and you should never invest money that you can't afford to lose. But - the returns can be greater than are available in savings accounts. Read around the subject, talk to people, and don't do anything until you feel confident - but don't discount it entirely.

I think your attitude to the money is commendable - so many people would just spend, spend, spend. I always feel you owe it to the person you inherited from to use the money wisely and well.

Thank you I love this board. It is helping me get an idea of priorities.

I too feel immense gratitude and don't want to waste a penny.
I am certainly thinking about stock and shares, but would want to go slowly slowly down that road.
Taking away the monies needed for house repairs, 2 ISAs a generous emergency fund. One pension seems fine, but I don't have one at all! So will need to look at starting one (on a small scale) My earnings at present are part time and tiny, but should hopefully increase over the next 2 years so I can really ramp it up then.
We would have enough for a (small) property. To buy out right. Looking at this to be some money coming in monthly plus the property to sell once we reach retirement. I am failing to see that investments would give the same returns, even with changes afoot.

atush

I am certainly thinking about stock and shares, but would want to go slowly slowly down that road.

Invest monthly, not in a lump sum. Look up Pound Cost Averaging.

It will help you from being afraid during periods when prices are falling, as you pick up more shares/units each month with t he same amount of cash.

With a pension, you can start small in that way. But do start. Choose a Vanguard fund, or a global tracker to start with.

The only property you should consider for now is one you live in. Repair what needs repairing, and replace/improve what needs improvement. Dont go overboard. This will increase the value of your home and make it more attractive to sell if you go on to do so.

Being a BTL landlord is expensive and time consuming and no longer the easy street to gains it once was due to changes in taxes.

bigadaj

atush wrote: »

Invest monthly, not in a lump sum. Look up Pound Cost Averaging.

It will help you from being afraid during periods when prices are falling, as you pick up more shares/units each month with t he same amount of cash.

With a pension, you can start small in that way. But do start. Choose a Vanguard fund, or a global tracker to start with.

The only property you should consider for now is one you live in. Repair what needs repairing, and replace/improve what needs improvement. Dont go overboard. This will increase the value of your home and make it more attractive to sell if you go on to do so.

Being a BTL landlord is expensive and time consuming and no longer the easy street to gains it once was due to changes in taxes.

You often quote pound cost averaging but that only works if that is when the money becomes available, for example from salary.

Because stock markets generally rise then if money is available the probability is that a lump sum investment will outperform a monthly investment.

ViolaLass

~FlowerPot~ wrote: »

I am failing to see that investments would give the same returns, even with changes afoot.

Provided the value of the property goes up,
provided you can find tenants,
provided they don't do a runner owing rent,
provided they don't trash the place,
provided drug dealers don't move in next door,
provided...

~FlowerPot~

ViolaLass wrote: »

Provided the value of the property goes up,
provided you can find tenants,
provided they don't do a runner owing rent,
provided they don't trash the place,
provided drug dealers don't move in next door,
provided...

I do see your point about troublesome tenants and that would be a nightmare, but being in it for the long term 15 years plus, would mean that a bad tenant would only be a small part of the long term plan.

smjxm09

If you are thinking about buying a property then it is worth watching the TV series Can't Pay Won't Pay. No rent for months then Court costs and bailiffs. People then vowing never again.