Are you in the fortunate position of wondering what to do with 50k inheritance or savings?
There are plenty of options for your cash. You could invest in real estate, save for your retirement or spend on a new car.
But which is the best option? Let’s find out.
What to do with 50k
Are you asking yourself ‘what can I do with 50k’? Before doing anything with your cash, consider the following:
- Your financial situation: are you planning any big life events such as getting married or having children? Do you have high-interest debt that needs paying off?
- Your goals and priorities: is paying off your mortgage early more important to you than saving for your retirement?
- Your timeframes: are you happy for your 50k to be tied up for years to come, or is there a chance that you will need it soon?
Once you’ve answered the above questions, you’re ready to start thinking about what to do with your money and make the right decision.
Investing your money can allow you to grow it and reach your long-term financial goals quicker.
But it’s important not to invest in anything that you don’t completely understand. Here are a few investments to consider.
Stocks: if you want to invest your 50k long-term, stocks may be a good option for you. The simplest way to invest in stocks is through an online stockbroker. Once this is set up, start researching companies that you’d be happy to invest in from personal experience as a consumer. Consider starting small and only investing in single shares. You can always add to your portfolio over time.
Real estate: whilst 50k won’t buy you an entire property, you could use it as a down payment for a rental property and take out a mortgage for the rest. As long as the rental income you get from the property pays for your mortgage and any other costs, it’s a good investment to consider. You could also look into investing in real estate through online P2P platforms. Groups of investors put their money together to jointly purchase commercial or residential real estate.
Corporate bonds: if you’re looking for a low-risk investment, company bonds could be the answer. You can select bonds that are only from large, reputable companies or bonds that will mature within the next few years. Although investments are never risk-free, bonds are generally a lower investment risk than stocks.
Fixed annuities: an annuity is a contract that pays a certain amount of income, typically monthly, over a time period in exchange for an upfront payment. The benefits of fixed annuity investments include guaranteed income and the possibility to grow your investment on a tax-deferred basis.
In yourself: regardless of your profession, learning new skills and qualifications can give you future opportunities that allow you to earn a higher salary and capital growth.
Wondering what to do with 50k in savings? Here are some options.
Start with the highest interest debts first such as credit cards and loans and work your way down. For example, if you have one balance on a credit card that charges 18% interest, and one that charges you 15%, tackle the card with the 18% interest first.
Having no debt will improve your credit rating, which can help with large purchases such as a house. Think of all the things you can do now you’re debt-free.
For an emergency fund: only 39% of Americans can afford a $1,000 emergency expense. If you’re part of that group, and you want to know what to do with 50k savings, creating an emergency fund would be a smart move.
You don’t need to use the entire 50k for your emergency fund.
A sensible amount would be enough to cover three to six months of your living expenses.
Look at your budget and total up the expenses that have to be covered every month.
Multiply that figure by three or six to come up with how much you should put into your emergency fund.
An emergency fund could be used for:
- Car and home repairs.
- An unexpected medical bill such as emergency dental treatment.
- Covering for outgoings if you lost your job.
- Paying bills if you’re unable to work for health reasons.
- Technology or utility replacements such as a TV or washing machine.
Down payment for a new house: if you’re considering buying your first home, or moving to a bigger house, using the 50k to put towards a down payment is something that you should consider. A higher down payment will reduce borrowing costs in the long run, including fees and mortgage insurance. The more money you put down, the more offers you will have from lenders so you can pick the one with the best interest rate or lowest fees.
Consider keeping some of the 50k to put towards a savings cushion for all the costs associated with buying a house.
For your retirement: even though you may be decades away from retirement, the earlier you start saving for the later years of your life, the more financially comfortable you will be once you decide to retire. Whilst many Americans believe that social security benefits will cover retirement expenses, in reality this isn’t the case. Thanks to the wonders of new technologies and medical advances, people are living longer, which means that retirement funds need to last longer. Adding to your retirement pot now will take the pressure off saving for your retirement in the future and ensure you have enough money to live a comfortable life.
Start your own business: have you got a good business idea that you’ve been itching to get started? Well, now you have the money it’s the perfect time to put your plan into action. Don’t get tempted to use the entire 50k immediately to get your business off the ground. Use a small amount to help get your business started. If, after putting in the required hard work, your business shows potential, use some more of the money to help it grow. Remember that throwing money at a business idea doesn’t guarantee its success, so only give it a go if you’re sure your business idea is a solid one.
A new car: is it time to upgrade your vehicle? Newer cars have improved fuel economy, cheaper or even zero road tax and you could save on MOT and servicing costs. Plus if you’re pumping regular money into maintaining your current car, you could save a proportion of your monthly budget by running a newer car.
Travel: vacations are a common financial goal for many people, and help motivate them to save money. Whilst it’s not recommended to blow the entire 50k on a handful of luxury vacations, spending a proportion on traveling can help you take a break from work and spend time with family or friends. After all, money should be used to have fun too.
Invest, save or spend 50k wisely
What to do with 50k will ultimately depend on your personal financial situation and goals. Consider the options above wisely and take time to decide what to do with your money.
You could put your money into a mix of all three areas, for example:
- Clear all high-interest debt.
- Set up an emergency fund to cover 3-6 months of your typical expenses.
- Invest in stocks.
Splitting your money into different categories will reduce the risk associated with investing and enable you to live a more financially secure life. Want to know more about managing your personal finances? Visit our blog for the most up-to-date advice.