I finished college three years ago, spent a year traveling, then started a decent salaried job two years ago. Solid money, I find the work interesting, good prospects, great security, regularly get free alcohol—I’m the luckiest humanities graduate in the world. Debt-wise, the big one is student—which is around $32,000. Alongside that in bad debts, I have $3,200-ish in overdraft debt, $2,600 in credit card debt, plus a nearly a thousand dollars here and there in personal debt.
Frankly, my lifestyle to this point is pretty secure and decently enjoyable. I make $2,500 a month post-tax, spend slightly under half on essentials, slightly over half on non-essentials. It’s fun, but I save nothing, though I have been making solid progress on paying off my previously mentioned bad debts. Given my lack of real day-to-day financial threat, money just isn’t a huge concern. I never have money, but only in the way people in their mid-twenties don’t have money.
But then: A year ago, my great-aunt passed away. She was a really interesting lady, but not a relative my family was exceptionally close to, primarily because of distance. We expected that there was a few thousand bouncing around, but there was a bit more than that. I ended up with $35,000 plus a high quality sterling silver sugar bowl.
When I actually got a lump sum, my first thought was to take care of my debt. Credit card, overdraft and personal debts paid off, straight off the bat, because it was bad debt. What really shocked me was that what I felt was a fairly minor amount of debt had done some real damage to a really good piece of income. It hacked out almost 20%. Had it arrived 18 months later, it’s entirely possible it could have been 40%. I was paying stuff off, but hey, if I could get credit, and wanted a holiday … I’m glad it’s gone.
Student debt was next. I’m lucky, I’m British, and our student debt is as good as it could be, really. It’s not that high, and interest is very low. Payments for it come out pre-tax, and it’s all tied to salary anyway. Putting a lump sum in a basic savings account will yield interest that out-strips interest on the loan. I considered making a partial lump sum payment, but the numbers just don’t work. So I left the student debt.
So, slightly under $27,000 left. The key priority for me is: Don’t blow it. I made a pact with myself to sit on it for at least six months before doing anything significant, to literally pretend it’s not there. Then if there’s something I want to do after that, it’s probably a good idea. I get a $9,000 one-off, tax-free cash savings account called an ISA. So $9,000 in there. Then, I get another $9,000 which I can put into a tax-free Stock & Shares ISA. I used a new start-up called Nutmeg to spread that investment around a variety of places—bonds, funds, and some other stuff I’m not convinced I know what it is.
Which leaves $9,000, which is being transferred in small monthly installments into a high-interest account from a lower interest account. The maximum input is $400, so I have $300 coming from my remaining lump sum, and $100 from my actual salary. That’s right, I got a lump sum and then started saving regularly for the first time.
All of which is the most responsible sequence I’ve ever taken part in, and therefore, definitely misleading. Without a doubt, when you get a lump sum, you really, really, need to take care of it. I was given an opportunity to set myself up, and I’m taking it.
But the reason I set myself a six month limit on spending was that I love travel, and experiences are always going to outweigh everything for me. I may not get another chance to take off around the world. I’m happy to leave the initial two-thirds as a sum to be used for a future ‘important thing,’ but saving for the next few years won’t get me where I want to be for anything else—I’ll be older apart from anything else. So my plan, is to wait four months (two months have counted down already), quit my job, work my two month notice and take the hell off. Unless I change my mind.
Also, I bought a new laptop. Mine kept overheating and burning my leg hair off.