Coming into an inheritance of any size can mean a considerable change to your bank account and create the urge to splurge. While there are many things you can do with an inheritance, it can be difficult to determine how best to navigate your new-found wealth.
As you begin to think about what you might do with your windfall, consider the following tips:
- Keep it quiet: If you come in to a large inheritance, it can be tempting to share the news with friends and extended family. While your prosperity is exciting, it can also mean people will be eager to have you invest in their “good” ideas, or will want you to spend your money in a way that doesn’t make sense for you and your family. Keep the news to yourself, at least until you’ve determined how you intend to use it.
- Take your time: If it suddenly feels like you have money burning a hole in your pocket, try to avoid the urge to spend quickly. Instead, take some time to consider whether or not you have the time, energy and temperament to manage your own money. Even if you decide to seek professional assistance, you may want to consider educating yourself so that you can make sound decisions. For example, take a course on stocks or real estate to learn the key metrics to evaluate good investments. Taking time to think will help you avoid making irrevocable financial mistakes or poor investment decisions.
- Create a financial plan: If you don’t already have a financial plan, now is the opportune time to create a thoughtful one that will incorporate your long-term goals and objectives. During this process, you will need to determine how best to spend your inheritance based first on what you need: Should you save for retirement? (Yes!) Pay off debt? (Yes!) Create a rainy day fund? (Yes!) Having a financial plan will help make sure you’re spending your inheritance wisely and are setting yourself up for financial success.
- Enjoy it: If you’re feeling confident about your financial well-being, allow yourself to splurge on one or two dream items. Wishing for a new car or a hot tub? Now may be the time to indulge—just be sure to pick only one or two luxury items as the finer things in life often come with a hefty price tag.
If you’re having trouble navigating your inheritance, take time to understand which professionals can help you. Ask how their compensation is structured, and always ask for references.
Working with a CERTIFIED FINANCIAL PLANNER™ professional is a great place to start to help you build a plan for your inheritance that fits your financial needs.
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