“Where to borrow if I have bad credit?” was what my search history looked like for a large part of 2024. I needed money urgently, but my low credit score kept shutting doors. I felt stuck, drowning in debt, and constantly wondering, “How can I fix this?”
But I got lucky when my late grandfather left a large inheritance in my name. My life turned around, and suddenly, I had enough to pay off my debts and still have quite a lot to spare. However, this experience left me with new questions: “What should I be doing with his money?” or “Should I spend it, save it or invest it?”
If you’re feeling just as unsure about managing your finances, I’ll take you through my journey.
When Life Gives You Lemons
When I received my inheritance, I knew it was my second chance to fix my finances, and I wasn’t about to repeat my mistakes. Let me explain—over the past year, I’d spent most of my money shopping while planning my wedding. Sadly, we called things off before tying the knot, which left me with maxed-out credit cards and a mountain of debt.
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However, just as I was grappling with the aftermath of my broken relationship and mounting debts, I got lucky. My late grandfather’s inheritance came through, and I was able to pay off my credit card debt immediately. But then came the big question: what should I do with the rest of the money?
Here’s how I thought through it:
“Should I Spend It?”
On instinct, I wanted to spend the money. I was young, hurt and just experienced both personal and financial trauma. I deserved to treat myself to something nice, right? The latest smartphone? Or an international holiday, perhaps?
After all, spending on things I wanted or unforgettable experiences could help me find some happiness again, right? Besides, you only live once, and money keeps rolling in and out of your life.
“Should I Save It?”
I considered putting the remaining inheritance into a savings account. The monthly interest rates would add to the amount, and I could see my money grow. But was it the best option available?
“Should I Invest It?”
I thought about investing in shares or long-term opportunities. After all, it takes money to make money. By investing in the stock market, I could generate some income for the long term. A few years down the road, I could cash in these investments for profit.
“Or Should I Give it Away?”
I also wondered if I should pay it forward. Maybe this windfall was a sign to help others in need. Should I donate the money to those less fortunate and make a difference in their lives?
There were way too many options, and I was simply overwhelmed. That’s when I decided to approach a professional financial counsellor for advice. Together, we explored my financial mistakes. I learnt that not only did I need to be more wise with my money, but managing your finances doesn’t have to be an all-or-nothing approach.
Here’s what I eventually did:
1. Started an Emergency Fund
I realised I was overly reliant on my savings accounts and did not have a spare pot of cash as a backup. I decided to start an emergency funds account, separate from my regular savings and pay cheque accounts. As advised by my financial advisor, I started putting away 20% of my pay cheque amount into this account.
This way, in the future, if I needed cash quickly to cater to an emergency situation, I wouldn’t need to dip into my savings, max out my credit card, or create an overdraft.
2. Paid off My Loans
I’d completely forgotten about my student loan, and the interest had ballooned into a significant amount. After pushing some money into an emergency fund, I decided to prioritise my student loan payments and pay them off in one go.
Paying off this loan gave me a huge sense of satisfaction and relief, knowing that I was now completely free from the burden of debt. I expected my credit score to improve significantly after paying off this pending loan amount.
3. Used my ISA allowance
My Individual Savings Account, or ISA, was lying idle and I was advised to make the most of it. I knew what it was but never fully realised its potential.
My advisor opened my eyes to its benefits. I could save up to £20,000 in an ISA every tax year, and the funds won’t be liable to income tax or capital gains tax. This was a significant amount of savings for me.
4. Saved for Future Goals
Finally, my advisor encouraged me to save for future goals. If I wasn’t sure what to do with the money, saving and investing in high-yield opportunities was a smart move. I’ve always dreamed of buying a house in Essex and going on an international holiday. Now, I had a solid plan to save for these goals.
In Conclusion
After a debt-ridden year, I was lucky to get a second shot at reclaiming my personal finances. Knowing that I could start again with a clean slate made me enthusiastic but cautious at the same time. Consulting a financial advisor gave me the tools to make the most of my money and secure my financial future.
Hope my experience helped you in some way.
