So £50K drops in my lap today, what would I do, and not do, with it?
There’s a load of ifs and buts in here and to absolutely make clear from the off – this is not financial advice. You should not do what I do. Personal finance is personal, we all have different realities, different pressures, different expenses.
The biggest thing I want you to take away from this is that you should already know what you would do with £50K.
Whilst it’s a large amount of money – it’s not necessarily life-changing for many. It’s not seven figures, it’s not a lottery win, it’s not “quit your job today” money (well it could be “change your awful job today” money).
It’s money that you will get, either across the year, or across the next couple of years, in regular streams of income regardless. Granted you will have expenses to pay for during that time too but still, it’s a feasible amount of money that you may get, through an inheritance, family help, maybe a couple of large work bonuses. It’s not completely unheard of.
So, let’s say I get £50K in my bank account today.
What am I doing, or not doing, with it?
We’re presuming this is net pay, with tax already paid on it.
What I wouldn’t do with £50,000
First, I would not book a holiday. This is because I’m lucky that holidays are already part of our budget. We plan what holidays we want to do in the year ahead, then save up in advance for them in our sinking funds.
I hear of so many people spending windfalls on trips to Disney World or a big cruise – and honestly I’ve no judgement. For some people, holidays are out of reach, a foreign holiday is a pipedream and often when a windfall is received that’s connected to inheritance for example, the pressure to do something “special” with it can be greater.
Hence – you do you.
How I’d actually work through it
One perspective I have on this is that it can be a “treat yourself” game. The cash has left the bank before it’s had any time to settle in.
At Financielle, we have a money management method that allows us to follow a flow of decisions with money and so this is what I would follow to decide what to do with this £50K.
First, I would look at my emergency savings – do I have any? Do I have enough? How do they make me feel? What’s going on in my life that might mean I need more money to fall back on immediately? Do I have at least one month’s emergency expenses?
After that, I would personally look at any consumer debts I have and list them smallest to largest. I would then work through one at a time and pay them off with the £50K.
Being consumer debt free is such an amazing feeling. When you don’t owe people or companies anything, your budget looks better, feels better and you have more money for you.
On a side note, Financielle community members have shared their apprehension about using inheritance to pay off debt. I can imagine this is especially true if the debt was run up with mindless spending – the guilt is real.
However, when you’re choosing to take back control of your money, follow a plan and build financial resilience for the future – and paying off debt forms a part of that – it can be the greatest thing you do with a legacy that you receive.
Anyway, back to me – I’ve worked through the Financielle Playbook – our money management method – and so moving down the list, I’d also build out a larger emergency fund and make sure it is held in as high yield savings accounts as possible.
I’d make sure that a good chunk of it was accessible, but I may consider putting some in a fixed-rate one-year saver if there was a better rate available.
If we move down the Financielle Playbook, we’ve:
- Built a mini emergency fund
- Paid off consumer debt
- Built a bigger emergency fund
What I’d do with the rest
Next up, we’d explore buying a home (if we want to), or possibly renovating one.
Here’s where people get carried away. “Let’s build that extension, let’s redecorate, let’s get a hot tub”. Love all those things – but – we should have these things in contemplation already. Before diving in and splashing the cash, we need to think carefully about if we were saving up for one of these, how much do we believe it would cost and how much are we prepared to pay?
Spending extra money on these things is great – if it formed part of the plan all along. Otherwise, it’s an impulse spend and needs to be considered alongside other money decisions.
What I’d genuinely do today
Bringing us to the final part, which is what I would genuinely do with £50,000 today.
I’m fortunate enough to have ticked off all the other steps (over decades, I may add!) and so when it comes to the Financielle Playbook, I’m in the Grow phase.
This is where, whether I’m using the Excess money in my monthly budget, or any windfalls (like £50,000), I’m putting my money into things that grow my net worth.
I’d consider looking at tax-efficient investment accounts first – in the UK we have pensions and ISAs. It makes sense to optimise the annual allowances, so I’d look at what allowances I have and then ultimately decide on how much to put in. I’d also make sure I looked at the right platform for me in terms of usability, as well as making sure I used a platform with as low fees as possible, to keep more of my growth.
But that’s just me.
Personal finance is just that – personal.
You should always be thinking about your next life goal, and be thinking about the money you need to achieve it.
That way, if you come into £50K – or indeed any amount of money – you know exactly what you would do with it.
Not sure where you sit in the Playbook? Start here.
Laura x
The content produced by Financielle is for informational and educational purposes only and does not constitute financial advice.