When you are living from paycheck to paycheck, it is a pleasant surprise when you gain sudden wealth. A common source of this is an inheritance from a distant relative. Before you get your head on the clouds, what practical steps can you take, instead? In the same way, what things must you avoid?
Do: Know the Legalities
You may get excited about the idea of holding a large amount of money. But, remember that there are legalities attached to it. A probate attorney could walk you through the details of your inheritance. A financial advisor can help you to decide how to invest your inheritance. Make it a priority to consult with such experts. Failure to do so might put you in a fix or could lead to a waste of what you received.
Do: Invest Wisely
What will I do with it? This is the question that will be with you as soon as you receive the news. Make your answer a life-changing one. There are many wise ways in which one can spend a large inheritance. Paying off debts is one. You can also invest in the stock market. Funding your retirement plan or your child’s educational plan are solid investments. These are decisions that you will thank yourself for at a later time. Think about where to put your inheritance money so that you will not have regrets later on.
Do: Enjoy the Inheritance Reasonably
Are you dreaming of taking a grand vacation? Crunch your numbers and see if your inheritance can make this dream a reality. Remember, though, to only spend a small percentage of it for fun. 10 to 20 percent is a good range for this purpose. Also, spend on experiences, not on material things. This is the reason why vacations or travel tops the list of fun ways to spend your inheritance.
Don’t: Live Beyond Your Means.
Do not give in to the urge of living the life of a one-day millionaire. If you can, act as if your inheritance is non-existent. Some even go through the lengths of quitting their jobs. They have the false notion that their sudden wealth can sustain them for a lifetime. Sometimes, an inheritance becomes the reason for one to go broke.
Don’t: Put Everything in One Basket.
It is good to use your inheritance for a lifelong business venture. But, do not do it with eyes shut. Remember that even the most well-planned business idea has a great risk attached to it. If you put everything into this undertaking and it fails, you will see your inheritance go up in smoke. Invest in many things and invest in moderation.
Don’t: Make It a National News.
You may want to share in your joy with some people. After all, it is not every day that one gets to inherit something. But, be vigilant to whom you tell it to. If you tell everyone, chances are they would want to “celebrate” with you. Such a practice will leave you with unnecessary expenses. There are even those who may wish to get a large part out of you through devious schemes. Thus, it is very important to choose people who get to know your news.
Receiving an inheritance could be life-changing. But like other finances that you will handle, the key is in wise spending.