An inheritance is a gift you may or may not have expected. Whether you were planning on it or not, you can put your inheritance to work for yourself today and for your future. You can also use the inheritance to focus on your children and provide them with education funding or a down payment on their first home. Here are some ideas of things you can do with the money if you find yourself in this situation.
Pay Down Debt
Tackle your high-interest debt with these dollars. It is a good idea to pull out all your cards, mortgage agreements, and bank statements. Make a list of what you owe, to whom, the principal balance and the interest rate. Unless the debt has a lot of emotional energy, such as a loan from a friend or family member, pay things down either from smallest to largest debt or from the highest interest rate to lowest (I like this way the most). If the inheritance was large enough, consider wiping out all unsecured debt.
Invest the Money
Once your debts have been tallied and settled to your liking, consider meeting with a financial professional to help you manage the remaining funds. You can invest it for the future or put it to work to provide you with an income right now. Carefully consider your risk tolerance when investing this money. Also, review how much longer you were planning to work. If you are less than five years from retirement, you may want to invest in safer vehicles.
Start a Business
If you have always wanted to start a business but did not because you lacked the time or funds needed to commit to it, this may be your chance. It is important to note that a bad business plan with no money behind it and a bad business plan with plenty of money behind it are both likely to fail. Do your homework. Make sure that your intended business goals are actually profitable and can support you now and in the future. Make an investment in yourself to boost your ability to succeed in your new business and get to work.
Renovate Your Home
Once you have put enough aside to cover any taxes you owe and you have covered the high-interest debt that has been nagging at you, consider renovating your current home. You may have missed hosting guests because your space was too small, or just felt too dowdy and dated. Be sure to make renovations you will love to use. A deck has many benefits if you love hosting guests at your home. If the market you live in will support it, you can make substantial improvements to your current house and still get your money out of it when it is time to sell. If you are at the top of your market, you may need to sell and buy elsewhere unless you cannot imagine moving to another house.
Travel
You want to make smart decisions with your inheritance, but you also want to mourn the person who is gone and celebrate their memory. Take a percentage of the money and take a trip to gain an experience you will never forget. Swim with the dolphins. Take a helicopter trip over the islands of Hawaii. Climb to the top of the Eiffel Tower. Link the generous person who left you a gift with a joyous event you will always hold close to your heart.
Retire
If you were close to retirement before receiving the inheritance, sit down and split the dollars into short and long term stacks. How much of it will you need in the next 5 years? Put those dollars into an easy to access money market account or savings for some growth and easy access. With money market accounts, you can earn money market rates of interest and watch it grow. How much do you want to put away for use in 20 years? If you are 30, you probably will not have enough to retire unless the inheritance is quite significant. However, if you are 55, that 5-year money may be enough to get you to a place where you can pull dollars from your existing retirement account. Carefully review your living expenses to see what it actually costs you to live on a weekly basis and review that against the monies available to you in the next five years. You may have enough to retire now with a little work.
Invest for Your Children
Put some money away for your children. If possible, split these accounts up. Save up for educational expenses, such as tuition. Helping your child graduate from college with no debt could be a terrific way to spread the gift you received across future generations. If your kids are already in college, there are other ways you can help. In addition to paying tuition directly, you can purchase an investment property in the city where they live and provide them with free room and board. If they choose to stay in the region, ask them to caretake the space for you while they get established in their careers. You get a tax write-off and they get free housing.
Ignore It
Money can change people, and not always for the better. If you find yourself struggling to deal with the stress of what to do with your inheritance, meet with a financial advisor who can help you invest it, and then ignore it. You do not have to put the money to work, make any changes to your home or go anywhere at all. You have the option to ignore the money, keep it a secret and stash it until you really need it or until you are ready to retire.
Whether you were expecting it or not, receiving a large inheritance can make it possible for you to greatly change the world for yourself, your family, your community, and the world around you. If you want to give back to your community, think back to the suffering that has truly touched you over the years and do something about it. If you would love to retire, take a hard look at your spending to see if you can turn this retirement into an income for life.
Figuring out what the best thing is to do with your money can be difficult on your own. We can help you plan for your financial future! Learn more here about what we can do for you.
