Losing a loved one is never easy, especially if you share a strong bond. However, cushioning the emotional toll it takes on your mental well-being with a cash inheritance is a bittersweet consolation. Deciding what you should do with a cash inheritance can be equally grueling, so let’s break down the best strategies.
Honor Their Wishes
Before planning a massive home improvement project or booking your dream vacation, it’s wise to consider the wishes of those who left you the money. The inheritance you’re receiving results from a lifetime of effort and dedication, so tossing aside their wishes to fulfill your instant gratification desires isn’t the most ethical thing to do.
Always consider whether your choice will be a fitting tribute to your loved one. If you keep that in mind, you will be more accountable for your actions and more deliberate in how you spend your inheritance.
Assemble a Dream Team
Don’t be surprised if everyone and their mother has an opinion on how you should spend a windfall of money like an inheritance. To help you through the inheritance process, you should assemble a team of unbiased and qualified experts. Expert advice from a CPA, tax counsel, insurance agent, estate broker, and financial advisor can conjure a map to long-term success.
Pay Off Debt
We learn in school that the invisible hand is an unforeseen force that dictates movement in a free market economy. However, the true invisible hand may be around your neck if you have a mountain of debt.
Using your inheritance to reduce as much debt as possible is a fantastic idea that your team of experts would unanimously agree upon. Credit card debt is the first drain on financial prosperity, so focus on zeroing out those high-interest accounts first. Once you have tackled that issue, you can focus on other debts with lower interest rates to ensure the lenders get as little of your money as possible.
Rainy Day Fund
We’ve all been in situations where we wish we had a nest egg to fall back upon when bad things inevitably happen. Setting aside a good chunk of inheritance money for rainy days makes a lot of sense, particularly if you know your roof, HVAC, or home’s foundation is expiring.
Being able to pay for those monumental costs with cash isn’t appealing, but it’s better than racking up unnecessary debt to fix an unavoidable predicament. It never hurts to have a “break glass in case of an emergency” fund.
Understandably, you want to do all the right things with the money you receive. Honoring their wishes, following the advice of qualified professionals, lowering your debt-to-income ratio, and setting aside money are all great things—albeit not that fun.
When you get your ducks in a row, have some fun while you still can. Plus, there are ways you can have fun and make money simultaneously. Sports fans can use their immense knowledge and follow proper money management strategies with sports betting winnings. Or you can get your inner Glengarry Glen Ross on and dip your toes in the stock market. Or you can take the dream vacation and relax with your toes in the sand, thanking your lucky stars that you had someone to care about your happiness.
Knowing what you should do with a cash inheritance gives you the best ideas for making the most out of it. As fun as it would be to spend it recklessly, you’re better off taking it slow, listening to the pros, and playing it safe.