Don’t get overexcited by this large amount of money and squander it! Here’s what you should do to spend your inheritance money wisely.
According to studies, 70% of rich families lose their wealth by the second generation, 90% by the third generation. Why? Plenty of young people are simply not ready to handle their inheritance money.
Managing an inheritance money?
For many, it’s more money than they’d ever seen before. If you find yourself with a substantial amount of inheritance money, don’t get flustered, and don’t get carried away! Here are few things to think about before you squander it all.
1. First things first
Before you do anything, check that the money is really yours and the will or last testament of the loved one has been followed. Don’t get overexcited and spend money you don’t actually have.
Also, some countries have inheritance tax (or estate taxes). Make sure that these have been settled, as you don’t want them to come back to bite you later. Once all that boring stuff is out of the way, you need to have a plan on how you’ll use your new-found wealth.
2. Something special
What would your loved one want you to do? If you know they’d be proud of you for doing something special, then it’s only fitting that you honour them. It may be donating to a particular charity or cause they were passionate about. It doesn’t need to be a lot, but even something small can go a long way!
3. Something important
If you have any outstanding debts to clear off, such as credit cards or personal loans, pay these off. It’s likely that the interest you are paying on this outstanding debt is higher than any interest you can earn on a savings account (especially given the current market conditions).
Remember, the amount that you will save in future monthly payments and interest will give you a lot more financial independence than you think.
4. Something sensible
It’s all too easy to get carried away and buy that dream car or take that first-class flight around the world, but remember those things will be gone before you know it, so invest some of the money. You might want to buy property, or even simply invest in an interest-paying fixed deposit account until you need the money at a later date.
If you don’t need the money right away, why not try dabbling in some safe investments that will generate a good return? Instead of squandering your inheritance money, look for something that will generate you more income.
Investing may sound scary and inherently risky, but a balanced portfolio (or directly investing in certain funds) can provide healthy returns over a longer period. If you have come into a larger sum of money, consider talking to your bank or a financial advisor who may help you make these decisions.
5. Something for you
Finally, despite the warning at the beginning, set aside a small amount to spoil yourself. Do something you’ve always wanted to do, take that experience and make that memory. Do it in honour of your loved one. They left you inheritance money because you were special to them and I’m sure they’d want you to have a little bit of fun.
Whatever it is you choose to do, just remember to stay level-headed and focused, have a plan, write it down, and take some time to think about it. If it still seems like the right thing to do after a few days, follow through.
What did you think about this article on using your inheritance money wisely? Let us know in the comments.
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