What Should I do with Inheritance Money?
The best use of your inheritance money depends on your current financial situation and the amount of resources that you already have. When you acquire a significant amount of money, it is always a good idea to save a portion and to invest a portion. If you are currently renting, consider using some of your inheritance to purchase a home. This is also a good opportunity to reduce your debts and to make major repairs.
Do not submit to the urge to spend large portions of your inheritance money on goods that provide temporary satisfaction, such as clothes and electronics. Instead, you should use it for purposes that can have a significant positive impact on your life. Debt reduction is a good place to start. If you have large bills that you have been paying gradually, you should take a portion of your inheritance money to pay off one or more of them.
It is often said that one of the most important assets that a person can have is real estate. If you are currently renting, this is the time to consider purchasing your own home. Depending on the size of your inheritance, you may be able to fully cover the costs of a home. Even if that is not possible, consider using the money to make a significant down payment.
Financial advisers tend to recommend that people have sufficient savings to cover three to six months' worth of expenses. This money is supposed to be used if a situation such as job loss arises and you are not able to generate revenue. If you do not have this, you may want to devote a portion of your inheritance money to achieving this goal. When you consider whether you need to set aside money for this purpose, remember that these savings differ from those for personal projects.
It is also wise to invest a portion of your inheritance money. You should consult with a financial adviser to determine the means of investment that is best for you. By investing your money, hopefully you will see it grow. When considering your investments, do not forget to think about your retirement if you have not already reached that age. If all of the categories above are satisfied and you have money remaining, it may be a good idea to make any major repairs or replacements that you have been putting off.
I saw in an article that if a person comes into a large sum of money, whether by inheritance or by, say, winning the lottery, the wise thing to do is to sit on it for three months and not spend any of it. That gives the person time to hire attorneys and accountants to help him spend the money responsibly.
Seems like I remember seeing an organization that was formed especially to help new lottery winners, since so many of them tend to end up with less money than what they started with!
If I inherited a lot of money, the first thing I'd do is get a financial adviser, to help me use it wisely. If the amount were large enough, I might set aside enough for a really nice vacation or some nice clothes, but then I'd definitely want to invest and/or save most of it.
Otherwise, I would probably try to save at least half of it, and then pay off as many bills, like car payments or credit cards, as I could.
But I think I'd consult a financial adviser on how best to deal with the inheritance tax. That's nearly always a problem with any sum of money you inherit.
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