What to do with £200k in the bank?

[MikeJ]

Max out your pensions. That's safe. If you're wife's on the payroll, max hers out too.

Be careful with the inter-company loans. That could turn your company into an investment company.

If you really don't need the money, sit back and think about what you want to do. Is there a charity that's close to you that you want to help?

 

[Where do we go from here?]

I'm in a similar situation.

Mad spending and wild nights out are well behind me - though I still enjoy good food and decent wine (you can get that in Aldi now).

I have one specific car aspiration, which is now set as a performance goal for next year. Other than that I live very comfortably on £24,000 a year.

Also, no kids to pass it on to.

Which does, like the OP, raise the question of what to do with cash and - to an extent - how to stay motivated in business (currently it's because I genuinely enjoy it).

Hence I'm interested in all the comments on this thread.

Did you somehow never get the chance to have kids or was it a conscious decision? Personally speaking, if I didn't have kids or anyone to build for, then I'd quit right now.

 

[Where do we go from here?]

Max out your pensions. That's safe. If you're wife's on the payroll, max hers out too.

Be careful with the inter-company loans. That could turn your company into an investment company.

If you really don't need the money, sit back and think about what you want to do. Is there a charity that's close to you that you want to help?

How do intercompany loans risk turning my trading company into an investment company?

I really do need the money for the sake of the kids. I want to give them every chance I can to make something of themselves.

 

[Ian J]

For various reasons, exotic foreign holidays aren't on the cards at the moment - we stick to 4 5-day breaks a year, which is remarkably cheap out of school holidays. (Also neither of us like the full-on posh hotel thing)

Neither do we and I rent other peoples' villas instead

 

[Scalloway]

How do intercompany loans risk turning my trading company into an investment company

It is to do with the percentage of company income derived from investments.

https://www.taxation.co.uk/articles/2018-05-01-337924-readers-forum-substantial-investment

 

[Where do we go from here?]

It is to do with the percentage of company income derived from investments.

Sure, but I thought that was only if my trading company was investing. What if my trading company loaned money to my investment company? The interest collected on, say £200k, would be way below trading profits and so there should be no issue.

 

[The Byre]

I really do need the money for the sake of the kids. I want to give them every chance I can to make something of themselves.

Excellent!

This is really a question of how to secure what I have.

Start by having a read-through of this -

https://www.ukbusinessforums.co.uk/articles/is-the-pursuit-of-equity-a-better-business-model.925/

Most SMEs (well, nearly all of them really!) are idiotically fixated on money NOW and profit. When you are talking to some financial advisor, he or she is working within the narrow bands of their financial discipline and experience. They can only think of money - and for them, money only means Pounds. (And the Pound is one sickly beast and will only get sicker!)

If you MUST keep money as a store of wealth, the Swiss Franc has proven to be the safest. One of those online banks in Luxembourg will be only too happy to help here!

There are other stores of wealth such as farmland, forests and similar investments that have all kinds of funky tax advantages when it's time to inherit!

Here's a fun tip - if you buy property in Germany and hold it for at least ten years, the sale is tax-free! Buy for 100.000€ and sell 12 years later for 400.000€ and the tax is set to zero. Similar schemes are available in France. Local accountants are cheaper than their UK counterparts and are vital here of course!

BUT there are other forms of equity - education for your kids being just one of them! (Remember that LSE graduates earn more than those from any other UK university!)

But my initial reaction would be to take a long and hard look at your business and see if one cannot use the creation of company equity to expand the business, rather than just sitting on a pile of useless cash. Become an Aldi and build out the business!

 

[Root 66 Woodshop]

Turning £200k into £1m sounds good, but I know nothing about developing a property. It would be a whole new learning curve. Not to say it isn't an option, but it's not something I'd feel comfortable throwing a lot of money into now.

Seriously, I don't have expensive tastes The car and motorbike suggestions wouldn't do much for me.

You don't have too, you can be the financials and employ someone (like me ) to do the developing for you...

 

[Where do we go from here?]

You don't have too, you can be the financials and employ someone (like me ) to do the developing for you...

Well, that opens a new can of worms. I'd still need to know how to judge value, and I'd be open to being taken advantage of by the developer. No implication that you'd ever do such a thing, but it's a possibility.

 

[Onthebrightside]

I really do need the money for the sake of the kids. I want to give them every chance I can to make something of themselves.

My son has advised me to spend all the money on myself, otherwise he will spend it all on himself. He has a great work ethic, worked since he was 15, but just spends it as soon as he gets it, motorbikes, nights out, food, drink etc. and I used to think poorly of him for not working towards a property of his own/pile of cash. His view is somewhat different - I am going to live for today.

A recent skirmish with cancer made me realise how right he is in some respects, all my savings disappeared really quickly and I would have gotten more help if I had no money!

My uncle bought his kids a house each (they live in Reading) one lost most of it in a divorce, the other sold it and went travelling around the world. My father spent a fortune on my brothers education and now he lives in a council house and works in a factory packing boxes and he is far happier than when he owned his own house and worked in avionic engineering.

Whatever you do I would get it out of the banking system as quickly as possible, you never know these days if one will crash. I had an account with Heritable Bank when Landsbanki crashed, fortunately not much in it.

 

[Chawton]

Well, that opens a new can of worms. I'd still need to know how to judge value, and I'd be open to being taken advantage of by the developer. No implication that you'd ever do such a thing, but it's a possibility.

Some general discussion of property development on this level would be of interest if anyone else has any input actually. To someone with no direct building skills but who is practically minded and looking to pick up experience by working very closely with a builder on self-funded projects.

 

[Gordon - Commercial Finance]

Some general discussion of property development on this level would be of interest if anyone else has any input actually. To someone with no direct building skills but who is practically minded and looking to pick up experience by working very closely with a builder on self-funded projects.

You don't necessarily have to have direct building skills, as long as you choose the right building contractor.
Especially on self-funded stuff.

 

[Mitch3473]

How do intercompany loans risk turning my trading company into an investment company?

I really do need the money for the sake of the kids. I want to give them every chance I can to make something of themselves.

....not getting into parental guidance here but surely by using your money for the kids to make something of themselves is sort of defeating the object....you're doing it for them. Let the moochers stand on their own 2 feet when they can and you have some fun, buy an Aston and live a little..... they'll be back for some of their inheritance anyway later on.

 

[Where do we go from here?]

....not getting into parental guidance here but surely by using your money for the kids to make something of themselves is sort of defeating the object....you're doing it for them. Let the moochers stand on their own 2 feet when they can and you have some fun, buy an Aston and live a little..... they'll be back for some of their inheritance anyway later on.

I know where you're coming from. My wife and I have discussed this and the paradox boils down to:

The kids who will deserve it wont need it,
The kids who will need it wont deserve it.
​

But that being said, if I'm lucky enough to have at least one of them deserve it, then it will be worth having the cash to pass to them to further their own ambitions.

We're going to have a couple more after this one is born, so maybe 6 in total. Having the money really helps to bring up a large family.

 

[Where do we go from here?]

My son has advised me to spend all the money on myself, otherwise he will spend it all on himself. He has a great work ethic, worked since he was 15, but just spends it as soon as he gets it, motorbikes, nights out, food, drink etc. and I used to think poorly of him for not working towards a property of his own/pile of cash. His view is somewhat different - I am going to live for today.

A recent skirmish with cancer made me realise how right he is in some respects, all my savings disappeared really quickly and I would have gotten more help if I had no money!

My uncle bought his kids a house each (they live in Reading) one lost most of it in a divorce, the other sold it and went travelling around the world. My father spent a fortune on my brothers education and now he lives in a council house and works in a factory packing boxes and he is far happier than when he owned his own house and worked in avionic engineering.

Whatever you do I would get it out of the banking system as quickly as possible, you never know these days if one will crash. I had an account with Heritable Bank when Landsbanki crashed, fortunately not much in it.

I like to think that I can steer people and situations in the way that I approve. Hopefully, it'll work with some of the kids.

 

[Chawton]

You don't necessarily have to have direct building skills, as long as you choose the right building contractor.
Especially on self-funded stuff.

This being absolutely foremost in my mind..!

 

[Onthebrightside]

I like to think that I can steer people and situations in the way that I approve. Hopefully, it'll work with some of the kids

I wish you well with that, we can but try

 

[antropy]

Treat yourself. Then with the rest save and/ or invest.

 

[Billiebox]

If you want to invest in a new business and you have some spare land, why not try a 'Self Storage' business. So you could buy a few shipping containers and put them on your land and offer storage space to rent.
Jane @ Billie Box

 

[JEREMY HAWKE]

If you want to invest in a new business and you have some spare land, why not try a 'Self Storage' business. So you could buy a few shipping containers and put them on your land and offer storage space to rent.
Jane @ Billie Box

We went through this the other day and it was 50/50 with the usual suspects So I do wonder if it is a good venture or not

 

[JEREMY HAWKE]

I would move to a very hot beach on the med

 

[mattk]

It is funny how these threads never seem to reach a satisfactory conclusion or include any meaningful new ideas.

Property is the obvious investment due to leverage, however as alluded to earlier the property market appears overheated. We are clearly coming to the end of the current economic cycle, which makes equities less attractive.

There is definitely a gap in the market for someone to help successful businesses invest their gains outside of the usual places.

 

[Gordon - Commercial Finance]

There is definitely a gap in the market for someone to help successful businesses invest their gains outside of the usual places.

I’ve long thought I would quite like to start an “unusual investment” fund which allows people to invest in things like classic cars and bikes, whisky, fine wine, boats, helicopters...

Would be fun

 

[The Byre]

That's called spending!

 

[Where do we go from here?]

Hi everyone,

I'm writing to update the contributors here on my current position and to solicit some further advice. Since I made the original post, we have continued to do very well. My company is now sitting on over £700,000 in cash (after taxes) and we expect this number to climb to somewhere between £1.1 and £1.5 million by the end of the year. I underestimated our profitability in my first post, so I'm being a little more realistic this time around.

I have the same problem as before, but bigger.

I won't extract the money and spend it on a sports car or mansion, to preempt those suggestions.

My inclination is to spread the money around: BTL, Gold, Stocks, Cash. I'm really looking to connect with people who have experience managing this kind of money... so if that's you, please step forward.

Thanks guys,

Lucas

 

[antropy]

My inclination is to spread the money around: BTL, Gold, Stocks, Cash. I'm really looking to connect with people who have experience managing this kind of money... so if that's you, please step forward.

Your best bet would just be put it in an index tracking fund - you can open a business account with a company like: https://www.hl.co.uk/

That's the best ROI you can get vs. time required in my opinion i.e. it's easy to do and you should get a good return.

I'd like to clarify I'm not a qualified financial adviser and investments may go down as well as up.

Paul.

 

[Gordon - Commercial Finance]

Hi everyone,

I'm writing to update the contributors here on my current position and to solicit some further advice. Since I made the original post, we have continued to do very well. My company is now sitting on over £700,000 in cash (after taxes) and we expect this number to climb to somewhere between £1.1 and £1.5 million by the end of the year. I underestimated our profitability in my first post, so I'm being a little more realistic this time around.

I have the same problem as before, but bigger.

I won't extract the money and spend it on a sports car or mansion, to preempt those suggestions.

My inclination is to spread the money around: BTL, Gold, Stocks, Cash. I'm really looking to connect with people who have experience managing this kind of money... so if that's you, please step forward.

Thanks guys,

Lucas

I’m still waiting on the Audi RS6 you were going to buy me!! I just read back and saw I also suggested you buy me a Triumph Daytona but I’ve got one of those now so you don’t need to bother. Just the RS6 please.

Seriously though, did you manage to do anything when it was £200k? A lot of suggestions were made and they will likely be the same with the bigger amount...

 

[Where do we go from here?]

Your best bet would just be put it in an index tracking fund - you can open a business account with a company

That's the best ROI you can get vs. time required in my opinion i.e. it's easy to do and you should get a good return.

I'd like to clarify I'm not a qualified financial adviser and investments may go down as well as up.

Paul.

The stock market makes me nervous at the moment. I'd put in 10% of our cash and add to that when/if the market drops.

This is my current idea:

- 50% with Flagstone (they split your money between several bank accounts so all cash is covered by deposit insurance)
- 10% Gold (will go up if anything really crazy happens in the banking/credit market)
- 30% in property (for the rental income - it would cover our expenses should the business fail. Also will rise with inflation)
- 10% in Stocks (Inflation hedge)

I'd then adjust the percentages depending on what was cheap. for example by moving cash from Flagstone to property or stocks if there was a downturn and they became cheap.

EDIT: I know someone could understandably respond "Looks like you've made your own mind up, so why ask here?" I get it might look like that, but what I want is to either be shown that this is a bad idea, or to find someone who has done similar and confirm my idea. I have nobody in the real world who is qualified to advise me, so that's why I'm here.

 

[Where do we go from here?]

I’m still waiting on the Audi RS6 you were going to buy me!! I just read back and saw I also suggested you buy me a Triumph Daytona but I’ve got one of those now so you don’t need to bother. Just the RS6 please.

Seriously though, did you manage to do anything when it was £200k? A lot of suggestions were made and they will likely be the same with the bigger amount...

No, I never did anything with the money. It's still sitting there (and included in the new number I mentioned).

The main suggestions were stocks/pensions. I still think it's overpriced at the moment though.

Glad you got the car!

 

[Financial-Modeller]

The stock market makes me nervous at the moment. I'd put in 10% of our cash and add to that when/if the market drops.

This is my current idea:

- 50% with Flagstone (they split your money between several bank accounts so all cash is covered by deposit insurance)
- 10% Gold (will go up if anything really crazy happens in the banking/credit market)
- 30% in property (for the rental income - it would cover our expenses should the business fail. Also will rise with inflation)
- 10% in Stocks (Inflation hedge)

I'd then adjust the percentages depending on what was cheap. for example by moving cash from Flagstone to property or stocks if there was a downturn and they became cheap.

Firstly, congratulations on 1) retaining the cash you had last time you posted, and 2) growing it further.

You seem to have some slightly unusual / contrarian views.

- You want to hold the largest (50%) share in cash, but want to pay Flagstone to manage it for you. Is there any advantage over just putting the cash component into bank accounts yourself?
- Generally good advice to invest in shares for long-term growth, but your reason is to hedge against inflation, but
- 10% in gold, which most people hold purely as a hedge against inflation. Gold is not an investment btw, just a costly asset with highly volatile pricing, but seems to garner cult-like following from those who follow the shiny stuff.
- Given current conditions, carefully consider what asset class within property you invest in.

Revisiting the first reply that you received, it seems strange that you have a talent for accumulating more cash than you ever intend to spend, but are focussed on accumulating more. Do you have any hobbies / interests that you could combine with your capital to gain more enjoyment from, or perhaps help to support a good cause or something.

 

[Gordon - Commercial Finance]

No, I never did anything with the money. It's still sitting there (and included in the new number I mentioned).

The main suggestions were stocks/pensions. I still think it's overpriced at the moment though.

Glad you got the car!

Daytona is a bike....but thanks!

 

[Where do we go from here?]

Firstly, congratulations on 1) retaining the cash you had last time you posted, and 2) growing it further.

You seem to have some slightly unusual / contrarian views.

- You want to hold the largest (50%) share in cash, but want to pay Flagstone to manage it for you. Is there any advantage over just putting the cash component into bank accounts yourself?
- Generally good advice to invest in shares for long-term growth, but your reason is to hedge against inflation, but
- 10% in gold, which most people hold purely as a hedge against inflation. Gold is not an investment btw, just a costly asset with highly volatile pricing, but seems to garner cult-like following from those who follow the shiny stuff.
- Given current conditions, carefully consider what asset class within property you invest in.

Revisiting the first reply that you received, it seems strange that you have a talent for accumulating more cash than you ever intend to spend, but are focussed on accumulating more. Do you have any hobbies / interests that you could combine with your capital to gain more enjoyment from, or perhaps help to support a good cause or something.

Thanks for your response. This is the kind of reply I was hoping for.

- Flagstone struck me as a good option because of (1) Access to higher interest rates and (2) I have been informed, maybe incorrectly, that banks are unwilling to be used purely to store cash as they have no opportunity to make any money. I had tried to open an account with Santander and was told they wouldn't allow me because I already banked with Barclays.
- Regarding Gold, I think I have been convinced by the argument that it is a good inflation hedge and that it will perform very well in a severe credit crisis.
- My intention would be to purchase BTL with cash.

I like to think I am spending the money, on security and peace of mind. That's more valuable to me than anything else I could do with the money. I have no profession and no intention to work as an employee again. The war chest will allow me to sustain myself and my family when my business declines, until I spot another opportunity.

 

[menetworkjadaltd]

Shouldnt the investment be in silver not gold?!

 

[Where do we go from here?]

Daytona is a bike....but thanks!

... proving my point about my lack of interest in cars/bikes.

 

[Where do we go from here?]

Shouldnt the investment be in silver not gold?!

I don't know, should it?

I don't believe that the silver : gold ratio is relevant. I know the ratio argument is used to demonstrate silver is undervalued... but I don't think there's any real-world reason that it would need to return to the historical proportion.

 

[menetworkjadaltd]

I don't know, should it?

I don't believe that the silver : gold ratio is relevant. I know the ratio argument is used to demonstrate silver is undervalued... but I don't think there's any real-world reason that it would need to return to the historical proportion.

True, and I'm sure at this moment their pretty even

 

[The Byre]

The stock market makes me nervous at the moment.

Fools and their money will be parting ways pretty soon right now! I can hardly wait for the fun and games that are coming! All that money pouring into the markets is just QE bloat-money.

Have a read of my other posts here - the last few in particular and take a look at my YouTube channel and the 'Market Crash?' videos in particular. I am prepping a third right now as I am beginning to see where this madness could be leading. (Hint - nowhere nice!)

 

[Deleted member 59730]

I know the ratio argument is used to demonstrate silver is undervalued... but I don't think there's any real-world reason that it would need to return to the historical proportion.

It depends on how many xrays are being done due to Covid using film. Even Cat scans are often output onto film for viewing rather than viewed on screens.

 

[tony84]

I looked at the price of gold 2 weeks ago, I think you may have missed the boat on that. Someone else suggested silver and does seem more steady with a peak around the time of the last recession - although it did not last long before it dropped back to where it was.

With £700k, you really should be looking for proper financial advice.

£700k could buy you a nice house in Cheshire with some half decent footballers as neighbours or you could rent it out to a footballer for a few grand a month or it could buy you a street in other parts of the north west. Thats one thing I love about here, I have customers in million pound houses and customers in £90k houses.

 

[Where do we go from here?]

I looked at the price of gold 2 weeks ago, I think you may have missed the boat on that. Someone else suggested silver and does seem more steady with a peak around the time of the last recession - although it did not last long before it dropped back to where it was.

With £700k, you really should be looking for proper financial advice.

£700k could buy you a nice house in Cheshire with some half decent footballers as neighbours or you could rent it out to a footballer for a few grand a month or it could buy you a street in other parts of the north west. Thats one thing I love about here, I have customers in million pound houses and customers in £90k houses.

The company and I combined already have about £50,000 in 1oz gold Britania coins (and some silver). I started buying gold at about £800/oz. Our average buying price is about £1150, though.

What do you mean by "proper financial advice"? I've spoken to the FA connected with my accountant.... I find it hard to trust someone who is just trying to gain commissions for himself though. His recommendations stop at maxing out the pension.

By my reasoning, the best property move would be 2 bed terraced houses in my area. They have about a 6% rental yield.