Receiving an inheritance can help make a difference in many of our lives. It may offer us an opportunity for a comfortable retirement, home purchase or a college education to name just a few life changing possibilities.
Inherited money has its own unique challenges and often evokes a wide range of emotions. Whether these feelings are good or bad, they must be dealt with properly to avoid financial sabotage. It is important to make a wise plan when spending your inheritance.
The first priority should be to develop a strategy that includes both short-term and long-term goals. Your financial plan needs to factor in your age, level of debt, retirement goals as well as your financial responsibilities. When you determine your financial goals and priorities, you will have a clear plan of action. This plan may help you avoid depleting your inheritance in a short period without regard for your future.
Here are some important considerations to help manage inheritance money:
• Before you start spending make sure you know exactly what you will receive after taxes, administrative and attorney fees. These fees can reduce your estate.
• Giving to your favorite charity may help reduce taxes. Consult with a financial advisor for information on how you can reduce taxes with charitable donations.
• Consider paying off outstanding debts, such as your student loans, credit card payment, etc.
• Prepare for unforeseen circumstance. Delegate a portion of the inheritance to an emergency savings account (this account should be able to get you through six months to a year should an emergency arise).
• Use this money to protect yourself and your family with various forms of insurance coverage, such as life, health, homeowners, umbrella policy, etc.
• Consult with a professional financial advisor to help develop and maximize your present and future financial needs.
With the proper planning your sudden wealth won’t be squandered, but can allow you a more stable financial future. Inheritance can produce financial enjoyment, as well as future security which can be obtained through sound advice and investments.
Answers from AZ