What to do with $250,000?

[notb]

Hi r/PersonalFinanceNZ,

Long time lurker and first time poster needing some assistance from this sub.

Unfortunately a family member has recently passed and I will be receiving an inheritance of $250,000. I'm 26 y/o, currently living at home with my parents, unemployed (was caring for mentioned family member) but am looking for work with a few interviews completed. I'm fairly confident I'll be back into work by end of April/early May earning between $60,000-$80,000.

I am wondering what are some options I should consider to set myself up with the inheritance, the family member would want to ensure that I make the most of this opportunity. My lifestyle and costs are really low, I usually save around 15%-20% of my annual income.

As for my financial situation:

Good:

- $10,000 in Simplicity Growth Funds

- $1,500 in KiwiSaver (Recently took out for First Home Purchase)

- $5,000 in Emergency Savings (Currently living off this due to unemployment)

Debts:

- $20,000 remaining on Student Loan

- $418,500 remaining for my First Home Purchase which is due to settle next year (currently in build), will be renting one of the bedrooms out as well

Should I look at putting the majority of the inheritance against my mortgage and student loan? Or should I look at investing this? Would love to hear your thoughts on where if so. Thanks in advance!

 

[missionarygirl22]

@notb Student loan is interest free so you can pay the 10% on your earnings over 14k (or whatever the threshold is today) when you start your new job and leave it be.

 

[resjudicata]

@missionarygirl22 Good advice - it's 12% over $20k now.

 

[resjudicata]

12%

God damn key

 

[notb]

@missionarygirl22 Thanks for your comment!

 

[knowledgelights]

@notb I would top up the emergency fund a bit, ideally, double it.

Leave the student loan alone as it's interest-free.

Park the rest somewhere safe as you never know your situation come settlement time next year e.g. no job or not earning enough to get the required mortgage.

 

[notb]

@knowledgelights Thanks for your comment. Yes, I definitely want to get that emergency fund back up where it needs to be. In terms of parking it I would assume a term deposit of some sort of fund that allows for easy withdrawal?

 

[knowledgelights]

@notb Yes TD will be your safest bet and you can time it to mature closer to settlement date.

 

[mattom]

@notb I'd personally chuck it all into the mortgage.

Makes sense to me since It should more than halve the payments leaving you a lot more free money in your wallet.

 

[notb]

@mattom Thanks for your comment, that is very true and would be much easier to pay off faster.

 

[xuongmaykido]

@notb Sorry for your loss.

With interest rates so low there is an argument to invest but I would use the money to wipe out mortgage debt.

BUT before you did that i would purchase something to remember the person who gave you the inheritance and something you can inturn pass down in time to your kids etc. eg a very nice watch or piece of jewellery.

 

[notb]

@xuongmaykido Thanks for your comment. I definitely am looking to purchase something of sentimental value to pass down.

 

[aureus]

@notb Maybe talking to an advisor. If it were me I'd put a big chink into the Simplicity fund.

 

[notb]

@aureus Thanks for your comment. Yes, I'll be talking to a few advisors, run the numbers and see how I feel risk wise.

 

[amandalp717]

@notb Assuming you are able to get a job, given your age I would either:
- Put it all in your Simplicty growth and forget about it for 15 years.
- Use it as a deposit to purchase another new build as an investment property.

While paying down the mortgage might sound good and provide freedom, with current low interest rates it is not really the best option. Paying a mortgage will also ensure you need to maintain a level of financial discipline while you are young(ish) - it is effectively enforced saving.

If you have a small / limited mortgage you are more likely to spend the excess and be worse off in 20 years time.

 

[notb]

@amandalp717 Thanks for your comment. I was originally leaning towards another property and knowing that my own mortgage will pay itself off eventually (plus pay raises, rent raises etc. can knock it out faster). Considering the returns versus how low interest rates are now it's not a bad idea at all.

 

[amandalp717]

@notb Folks here appear to be very risk averse in relation to debt, but a sensible level of leverage is perfectly fine and preferable.

 

[lonelyhorse]

@notb I’d prob pay 168500 off the mortgage to get it down to 250k, invest 56500 and spend 25 on something that I really wanted. Why? No idea, just what I’d do if I came into 250k this morning

 

[notb]

@lonelyhorse Thanks for your comment!

 

[purpleprincess]

@notb $250,000 into $418,500 mortgage, then reorganize the loan with the bank to go 30 years on the remaining amount making your repayments tiny, then just watch that bad boy grow with equity and your boarder rent.