Receiving an inheritance is bittersweet, on the one hand presumably a loved one has been lost, and on the other, you now a unique opportunity. The temptation to spend inherited income is almost universal; in fact, scientists have even studied how people treat windfall income differently than earned income.
Your first order of business needs to be restraint—don’t immediately consider an inheritance license to drastically increase discretionary income.
A good rule of thumb is to look at your overall financial picture and use an inheritance to ameliorate factors that are holding you back, and then, advance goals.
Back to Basics
An inheritance can provide the amazing opportunity to offload student debt, which can free up your regular income for investing in the future.
Along with decreasing debt, an inheritance can help younger folks to fortify their emergency fund—an account of three to six months income used in the case of financial emergencies.
Home ownership has long been the cornerstone of the American dream, and an inheritance can be used for the down payment on a home. Money used to buy a home should be readily accessible, but “safe” from being easily spent.
Think of the Future
When saving for retirement, many will underestimate how long they will live and won’t account for things like hobbies or travel.
So saving and investing for retirement is not a bad idea. Even a one-time investment increase to your retirement funds or an IRA can yield huge benefits for the future.
Aside from paying off debt and making sensible investments, an inheritance can provide the chance to invest capital in opening a business. This investment probably requires the most care and vision, and it’s not unwise to save more than six months income for the initial stage.
Another option is investing in the stock market, for example, which can provide a great ROI, but needs to be done with care. Seek out advice and do research if you would like to engage in this investment strategy.
If you’ve recently gained an inheritance, we can help you achieve your dreams by making the most of this lasting legacy.
Contact Blisk Financial Group today to schedule an appointment.