I have some cash, how can I use it smartly?

I have a significant amount of cash, what’s the best place for my money? Knowing what to do with a large amount of money can be difficult, especially if you received it unexpectedly. Here is what you can do if you have a significant amount of money to invest.

Clear any outstanding debt

You are charged more interest on most credit cards and loans than the return you get from savings accounts or investments, so focus on clearing your debt first.

  • Start by listing all your outstanding debts
  • Work out which debt charges you the most
  • Pay off the debt with the highest interest charges first

Make sure you check if there are any restrictions on whether you can repay each debt early, as you could face early repayment charges.

Overpay on your mortgage

Using your savings to reduce the balance on your mortgage could save you hundreds or thousands of pounds in interest.

  • Check your mortgage documents or contact your mortgage provider to find out how much you could overpay without penalty.
  • Compare how much you interest you will pay on your mortgage till the end of its term to the amount you will be charged by making a large payment.

Some mortgages charge you for overpaying too much in a single year; this can be as much as 1% or 2% of your mortgage balance.

Use your ISA allowance

If you have not used your ISA allowance this tax year you could open a cash or stocks and shares ISA. The main benefit of an ISA is that it is tax free and for the 2017/18 tax year, the annual ISA allowance is set at £20,000.

Stocks and shares ISA

Stocks and shares ISAs (also called investment ISAs) let you invest your money in a tax efficient way. This is because your annual ISA allowance is not taxed, unless you receive dividends on your investment.

Build your retirement savings

Depending on your individual circumstances and existing retirement provisions you may want to consider using your money to invest in a pension.  Investing in a pension has a number of tax benefits, and depending on your income it could boost the value of your fund by up to 50%.

Choosing a savings accounts

Look for a savings account that offers the highest interest rate while giving you the access you need to your money.  If you want to lock your money away for a set period a fixed rate bond or notice savings account could offer a better return.

Choosing an investment

If you are happy to tie your money up for at least 5 years you could explore your investment options, however your money will likely be exposed to some risk. Even if you choose a low risk investment you would need to be comfortable that your money could drop in value if your investments perform badly.

Investing in property

There can be a number of advantages to this; such as the ability to rent a property out to earn an income or renovating properties and selling them on for a profit. If you do not have the cash to buy outright then you are likely to need a buy to let mortgage, which will add extra costs to your property venture.  If you rent out the property you will take on the responsibilities and expenses of becoming a landlord which could end up costing you more than you think.

Speak to an IFA

If you are unsure which option is the best choice for your individual circumstances, you may want to speak to an Independent Financial Advisor (IFA).  Daryl Harper & Niaomi Collette of Money Talks Education are IFA  qualified and can help you with a selection of different investment options that are well suited to your financial goals and circumstances. Contact them now

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