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You’ve just inherited a handsome sum of money; so, what are you to do with it? Not only are you dealing with the emotions of losing a loved one, you now have a major decision to make. It can be very difficult trying to make a smart financial move with so much going on all at once. The most important thing to remember is not to make a rash decision. Take a moment for yourself and don’t rush into anything you’re not ready for. Although you want to be sure not to delay too long, before you do anything, you should think through all of your options and how the decision you make could affect you down the road.
Here are some options to consider if you receive an inheritance.
Have a Talk: This is when it’s time to sit down with your financial advisor. If this has not already been planned for, it’s time to ask some questions. Your financial advisor, being an emotionally-removed party, can help you make more rational decisions and help guide you while keeping your best interests in mind.
Fill Your Pocket: Now that you’ve just received some extra cash, put some in your own pocket. Deposit some money, not only into your savings account, but your checking account as well. You don’t want to go wild and overspend so make sure you stick to that budget. I’m not saying to spend it all in one place, just allow yourself a little extra breathing room to reduce some stress.
Pay it Off: If you have any debt, it may be a good idea to use your inheritance to pay it down or pay it off – especially any high interest debt. This will free up your future cash flow, reduce your expenses and save you money in the long run. Remember, stick to your plan and budget!
Invest Some: Having a large sum of money in your checking or savings account is great, but not only is it probably not gaining any interest, it could end up losing its value. Money that just sits is actually depreciating because it won’t keep up with the costs of inflation. There are several investment vehicles that are available but finding the right one comes with your specific situation. Here are some popular investment options to consider; Life Insurance, Annuities, Stocks, Bonds and Mutual Funds.
Set Up a Trust: I’m sure you want to make sure your heirs have a sound financial future. Setting up a trust is one way to ensure they won’t be “left out in the cold” and left to make difficult decisions with their sibling(s). There are several variations of trusts so it’s a good idea to consider which best fits your needs. A trust can be a great way to cut taxes on your inheritance, but before making any decisions, seek professional advice to get everything set up the right way.
Knowing what to do and when and how to do with regards to your inheritance is a big decision. You don’t want to spend too much or save too little. By now, you should have a sound financial plan in place that prepares you for a big “life-event”. If you don’t, it may be a good time to start planning one now.
See you next week!