The average American inheritance is $177,000, according to CNN. This means that if you’re reading this, you probably have quite a bit of jingling in your pockets. Since $177k is average, that’s the number we’ll use for this scenario. So the question is… how should you use a $177k windfall?
Think of the Person(s) Who Gave You the Money
The last thing you want to do is disrespect the deceased. Consider how they may like to see the money spent.
I read an article recently about a man who scrimped and saved for decades. He never bought anything beyond the necessities. Once he passed, his nephew inherited his multi-million dollar fortune. The kid bought a supercar with much of the money. The license plate said ‘ForTom’. What a shame.
But ultimately, the person gave you the money. They chose you. It’s your choice how it gets used.
Assess Your Situation
Do you have any ‘bad’ debt to pay? Bad debt is debt which will not result in more money. It’s usually credit card debt. This is debt that’s guaranteed to keep costing you more money in the long-term. A business loan, for instance, is good debt. You may make more on the business than on the interest of the loan. Keeping good debt is okay. Many wealthy people have good debt.
If you have high-interest debt, I recommend you end the relationship. Reason being, it’s a bad deal. With the stock market, getting 8% is within reason. Thus, debt up to 8% can be seen as okay because you can make more money investing it rather than paying off the debt. However, if your windfall is large enough, it’s probably a good idea to get rid of all debt. It may help you sleep better at night.
Get Yourself in a Secure State
Once you’ve dealt with debt, look at your surroundings. Are you happy? Is this where you want to be in life? Consider upgrading certain areas of your life (within reason!). This means getting a new roof for your house, putting your daughter through college, or buying reliable transportation. You want to feel secure with your life.
Use the Inheritance to Make Even More Money
Here’s the fun part – you can use that money to make more money! I’m not talking about gambling… I’m talking about investing. Which, I suppose, is a form of gambling. But it’s about the safest kind of gambling out there. It’s how most people create wealth.
Consult a financial professional before making any decisions. This blog post is not a be-all, end-all for you. Each persons investment plan will look different. But for the most growth, look to equities. If you want to play it safe, go for bonds. If you want something in-between the two, buy your age in bonds and invest the rest in equities. Avoid money market funds, certificates of deposits, cash, etc. Those don’t even keep up with inflation. ‘Investing’ in those vehicles will cause you to lose money.
Our other articles on real estate can help if you want to use your inheritance to invest in real estate:
- Buying Real Estate Without Paying For It
- Divorce Death and Debt – Three Ways to Get Cheap Real Estate
- How to Invest In Rental Real Estate
Setup a New Pattern in Your Life
An inheritance is a gift that keeps on giving, when properly used. An inheritance means your financial situation stays elevated – for life. Then, once you pass, you can pass on the wealth to another generation. How fulfilling would that be?
Before making any decision, I suggest to wait at least a month. Let yourself adjust to having six figures at your disposal. I can imagine that would be life-changing. That’s more than most people make in an entire year. Here’s a wrap up:
- Give thanks
- Assess your situation
- Get yourself in a secure state
- Invest some of the money
- Keep the tradition alive.
Finally, if you want comprehensive advice on dealing with your inheritance money, consider picking up a copy of The Sudden Wealth Solution: 12 Principles To Transform Sudden Wealth into Lasting Wealth. The book has something like 5 out of 5 stars on Amazon.com and the reviews have been favorable. At under $40 bucks, its solid investment if you do anticipate receiving an inheritance. Get a copy here.