What I will say is the only thing that is “safe” to invest is cash. Everything else involves risk. (Cash involves interest rate risk (your income goes up and down) and the risk of devaluation through inflation, but in terms of guaranteeing its cash value, there’s only cash).

For this reason, investors seeking an income generally have to move along the risk scale, diversifying their portfolios to try to manage down the overall risk, but there certainly being no guarantees.

Here’s my best article on how to invest across the assets for an income:
http://monevator.com/2008/02/15/try-saving-enough-to-replace-your-salary/

Here’s an article on having an emergency fund, which you must earmark some of your cash for in my view:
http://monevator.com/2009/10/01/emergency-funds-the-ten-essential-steps/

Here’s HMRC’s page on taxes on income:
http://www.hmrc.gov.uk/incometax/basics.htm

Please do keep reading around the site, as we’ve covered tons of stuff — here’s our archive:
http://monevator.com/archives-2/

Personally I’d use the one million to replace my formal salary, similar to what you suggest except I’d do it via a very diversified portfolio that will hopefully keep my capital intact after inflation. I’d then do a variety of interesting jobs, or possibly try to build up Monevator into a big site as may do job, or similar.

I went through a period of not working and living off savings. It was incredibly boring and demotivating after the first couple of weeks. I’m not sure I’d do it at 65 now, let alone in my mid-30s when I did give it a go, and certainly not as our 20-something one-hit wonder.

Financial freedom is brilliant. No motivation points the way to the grave, for me at least.

Cheers for stopping by!

I’d say that’s bad advice — live off the interest. Enjoy your life while you are young. £40k a year is enough to do almost anything you want — especially when you think – you won’t be at work 9-5 for that money — it’ll come to you whatever you are doing – wherever you are.
Why spend your life working – so you can have £14m when you are 65 – too old to really start any big project, or worse, only be able to use that £14m to pay for your health care, like paying for a room in a specialist dementia nursing home.
If you are lucky enough to have £1m in your bank – live off the £40k – any you don’t spend – let that become your compound interest.

Talking about risk, you also need to decide your attitude to risk. Risk and reward go hand in hand. My own view would be to have one or two high-risk pots, one or two low risk, and the other six as medium-risk.

The other thing you need to decide is your investment timescale. If it’s a retirement fund and you’re in your 20s, it’s a completely different game to if you’re in your 60s.

Having said all this, at present inflation-proofed investments and property look good to me, although I’d stay out of the domestic property market for a year or so until prices bottom out.

But as you say how to invest a million is a nice problem to have

I pretty much know the answer to your question from the top of my head (sad I know…) Gold would have been best, followed by cash, followed by equities.

The noughties was a truly terrible decade for the stock market, but understand that makes it *more* not less likely the next decade will be better.