We’ve been saving for our first home’s deposit for a while now, and whether we use the personal loan we secured while we wait for my savings to pick up, or for the inheritance to come in, or by the time we are able to get a suitable property we can cover it on our own again, we’re finally ready to make the deposit and realise our dream.
Getting to this point hasn’t been easy, but it’s so worth it to build our family home together and create something really solid for the children. While we’ve put away a little from each pay packet and I’ve added varying amounts to the pot depending on what my month was like, Steve’s inheritance is also a major help, and we’ll use it to fund the deposit if my savings haven’t picked up.
If you get a windfall like this, I encourage you to also put it towards something worthwhile. You might not be looking to buy a home, but there are always good investments to be made when a large chunk of money that you weren’t expecting fortuitously lands in your lap. It could even be winning the lottery, and after you’ve dealt with the logistics of that actually happening, you’ll need to make decisions about what to do with your windfall.
Settle Your Debts and Decide Your Priorities First
Of course, the first thing to do is pay off any debts that you have. After that, there are some good tax planning decisions and investment options that can help you make the most of your money. The biggest things to look at when you’re deciding what to do is how long you have to leave your money untouched, and how much you’re investing in the first place. I’ve given you some ideas here, but anything higher (lucky you!) and you should consider consulting a professional financial advisor.
With smaller, but still sizable, sums of money the best thing to do is take medium-risks over a period of at least 10 years. In my research, the best experts I found suggested a portfolio with 40% in UK stocks and 20% and 15% in US and Europe stocks respectively. For emerging markets like Asia and Japan, invest 5% in stocks but before you do this, make sure you’ve put 10% of your windfall into absolute return funds. These are funds run by experts, who use different strategies to ensure profitable returns.
In terms of tax planning, if you can afford to leave your money alone until you’re at least 55 you should think about putting it into a pension fund that you get a 20% basic taxpayer relief and 40% higher tax payer relief, and are now allowed to spend on anything you’d like. You can also make use of your and your partner’s $15,240 ISA allowance. A low-cost FTSE Tracking Account is a good idea for £5,000, since they can average 5% growth per year after inflation.
I am excited to be prepared and know what I would do with a sudden financial blessing. What would you do?