When you receive an inheritance you want to do your best to use it wisely. And if you inherit a large sum of money, then you might find that everyone has ideas of how you can spend that money or invest it in this amazing business opportunity.
You need to be smart, though. It might be tempting to be frivolous, but an inheritance can be a great way to help a person get back on their feet, or create savings for your future.
Because you are emotional after the loss of a loved one, it’s best to not spend the money immediately. Put the money in a checking or savings account and don’t touch it until you can think more clearly. Wait a few months at least.
Once you have a clear head you need to have a plan. Follow these steps to make sure you make wise use of your inheritance.
Inventory
You need to take stock of your current financial situation. Do you have a lot of debt? Are you adequately insured? Prepared for retirement some day? Do you have savings which can sustain you for six months should you become ill or lose your job? Order these questions in level of importance given your specific situation, and then start making sure you have financial stability.
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Paying off high rate credit is a good place to start, as well as anything that you don’t want to take into retirement with you. But it’s important to be sure you’re building yourself a little nest egg as well. So decide how much you want to pay down on your credit while also building on your savings.
Don’t Jump All In
It’s tempting to be a little frivolous with an inheritance. Perhaps that’s what your family member would want, for you to do something for you. But take time and think about it. You shouldn’t feel like you can’t get yourself something special, but you don’t want it to put you in further debt and you don’t want to regret the decision. So take some time to decide what you really want to do, but don’t spend all of the money on it.
Create an Investment Portfolio
This could be your time to get rich slowly, so to speak. Now that you have this extra cash flow you can really look into investing in things like stocks and other fixed-income investments. Don’t be risky, though. A nice mixture of stocks and fixed-income investments will get your investment portfolio in the black and will be something you can rely on later in life.
Hire a Professional
Sometimes managing your money and investments can be completely overwhelming, especially when you end up with a windfall from an inheritance. Consulting a financial planner will help you maximize your investments. If you inherited a business or a home, then you’ll want to have the aid of professionals to help you manage these investments and decide what your best options are, from both a financial and personal standpoint.
Receiving an inheritance is a complex thing and many people tend to blow it. But if you take your time and really think about what you want to do and what would be best, then you can really make the most out of your inheritance.
