Received the gift of a small sum, looking for advice

[daneenkareem]

Myself and my wife received a belated wedding gift of 5k from a relative recently. We are both renting, v little in savings, approx 4k atm, have 10k loan left to pay. Both in good jobs (combined income approx 120k gross)
My inclination is to split the gift, 1/2 in emergency fund, 1/2 off loan.
Neither of us are v financially literate but improving all the time. This isn’t a life changing amount of money but would appreciate any thoughts.

 

[donny4793]

@daneenkareem life is about living as well... I would put 80% off the loan and then 20% on something fun you and your wife would like,

Weekend away, decent coffee machine, Cheap weeks in europe

Its a gift after all there should be some enjoyment as part of it.

 

[hassel]

@daneenkareem My two cents, Id be inclined to put the majority off the loan as others have said, yes keep some to enjoy but dont blitz it all. Is there any thing stopping you guys paying off the loan early? With your combined wage, even with renting, you should be able to put a good chunk off it. As it is now, you realistically don't have savings, you have a 6k debt. Id get smart about paying it off quicker, get used to the repayments and after its paid continue saving that amount, your savings will grow in no time and you'll be in a much better position. I was extremely frivolous with money until I met my partner, but with his guidance we have managed to save our house deposit with prioritising savings first, on significantly less income.

 

[river22]

@daneenkareem If it was me, I would be wary of clearing out the savings without knowing more.

Definitely use the gift the clear half the loan, but I wouldn’t sacrifice your emergency fund just to save a few 100 quid on interest

 

[baritoneman]

@river22 I'd agree with you. Paying off a loan as long as your paying it off as and when you should is usually a positive thing if you need to borrow again. Some banks charge a penalty if you clear a loan early as well so id recommend checking on this before you clear it OP

 

[tentmaker17]

@river22 They're earning good money. By not having the loan any more they can build up their kitty again even quicker

 

[asurfpro]

@tentmaker17 You have no idea of what their outgoings are though. You should never leave yourself without any fund to fall back on in the event of unforseen exp

 

[rdk2012]

@daneenkareem Pay the loan and save the interest, which will be way more than your savings interest. At the same time pay the amount you would be paying on the loan into a regular savings account and you will replenish your savings with zero effort and without paying interest. Win win.

 

[broder62]

@daneenkareem Depends on the interest rate on the loan and if there is a fee for paying a bit off early .. I'd probably pop a decent bit in savings and maybe have a nice weekend ..

 

[foxic]

@daneenkareem Treat yourself. If you're comfortable enough with your finances as they are then there's no reason not to treat the gift as a happy windfall and do something to put a smile on your face and make some happy memories. I'd use it on a nice holiday.

 

[coffey]

@foxic Downvoted, typical of this sub, if you’re not living in a cardbox box with a few mill in the bank are you even living lol - it’s a gift wedding gift people! Spend it on something you’ll remember.

 

[bibbi]

@daneenkareem Technically paying off the loan fully and clearing the interest makes the most sense financially but you have to take into account your own appetite for risk and how you approach stuff. Would you consider investing it in yourself or wife?

I personally feel more comfortable with cash just sitting there if something goes wrong rather than going begging for it. I'd also recommend income insurance!

 

[asurfpro]

@bibbi Categorical, two thumbs up regarding your income protection suggestion.

For everyone reading this, TAKE OUT INCOME PROTECTION