If you are lucky enough to receive a large inheritance, you should think wisely about how you want to spend it. Here are a few things you should consider when deciding how to divvy up the money.
Pay Off Your Debts
If you have debts, it may be a good idea to use your inheritance to pay them down or pay them off. This will free up your future cash flow, reduce your expenses and save you the money that would otherwise go toward paying interest on your debts. There isn’t anyone who ever got into financial trouble by having no debt at all. When given the choice, conservative investors choose to eliminate debt.
Invest the Sum
There are many ways that you can invest the money you have inherited. Acting on the pay yourself first principle, you can put your newfound wealth to work. By investing your inheritance you allow it to grow. Your financial advisor will be able to help you invest wisely. The best thing to do for most people is to invest in a large basket of funds that offer a solid return over time. It is considered safe, and often the smartest investment for young people with an inheritance. You could even invest in a large purchase that will add to your quality of life. Replacing your appliances can increase the resale value of your home.
Buy Something for Yourself
Once your debts are covered and your assets invested, you can spend the money on something you’ll be able to enjoy. If your investments are producing a steady stream of income, or you’ve truly hit the jackpot and inherited a pool of money so large that you are debt-free and have plenty of money left over each month after paying your bills, you can splurge on that new car or place at the beach. Like with any other decision, discuss first with your financial advisor. However, don’t overdo it. Just because you can buy a garage full of exotic sports cars doesn’t mean that you should.
If you’ve received a large inheritance, you should think about how you want to spend it. You can pay off your debts, invest the sum, or buy something for yourself. These are all great options if you are faced with a large amount of money and not sure what to do with it.
Read this next: How to Lower Your Homeowners Insurance Premiums
