Invest - Don’t Splurge Inheritance Money

May 15, 2008 By Tisha Kulak

Losing someone close to you is a difficult situation to deal with. Mourning the loss of a loved one is generally also coupled with making complicated decisions about finances, funeral arrangements, moving on with life.

If you are the recipient of an inheritance, it is crucial that you do not drown your sorrows with a shopping spree or impulsive investment during your time of grief. Depending on the size of your inheritance, the right decisions could set your family financially and it is a decision that should not be taken lightly. The person who left the money to you may have already attached some direction as to how the money needs to be used. If that is the case, you may not have much room to do what you like. But if you have been left to your own devices, here are some ideas for using your inheritance wisely.

Write Down Goals

Setting both short and long term financial goals if you do not already have them, may be the best first step you can take. Outline on a piece of paper what your goals are (buying a new house, college fund for the kids) and then decide how the inheritance money can help you achieve those goals.

Start an Emergency Fund

If you do not already have an emergency fund, tucking your inheritance away into an interest bearing account can help tremendously in the even unforeseen circumstances arise in your life. This emergency fund should be separate from your regular bank accounts and only used for real emergencies (loss of job, need a new roof)

Plan Your Retirement

If you are not wise in the ways of investing and you plan to inherit a sizeable amount, you may want to consider speaking with a qualified financial advisor on how to invest your money for retirement, for college in the future, or any other financial investment opportunity you are interested in.

Buy Insurance

If you and your family do not have adequate insurance, including health and life insurance, using the inheritance money to pay for a new policy may make a lot of sense.

Pay Off Your Debts

If you have been struggling with making monthly payments towards paying down your debts, you may want to use your inheritance to get the monkey off of your back right away. Before making that decision, make sure you have a good understand of how much you owe and to whom, especially if you do not have enough money to pay off all of your debt. Seek professional assistance if you have to in order to determine which bills should be a priority.

Make a Savings Deposit

If your finances are in order and you are in no great need of using the inheritance money in other ways, deposit the amount into your savings account to prevent impulsive purchases.

Make a Donation

Depending on the tax laws of your state, you make consider donating money to your favorite charity. Speak with a qualified advisor, who can you help you determine the best way to reduce your tax bill.

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