Receiving an inheritance after the death of a loved one can be an emotionally difficult time. However, if you receive a substantial sum of money, it also provides a valuable opportunity to improve your financial position. With careful planning and strategic investments, you can set yourself up for long-term financial security. This article outlines some smart ways to make the inheritance work for you.
Get Organised and Make a Plan
The first step is to get very organised with the new funds you have received. Make a list of all your current debts and financial obligations such as loans, mortgages, credits cards, and any other payments you make on a monthly basis. This gives you a clear picture of any existing financial burdens.
Next, check your credit score and history to identify any outstanding issues or errors that need correction. Now you can strategically allocate parts of the inheritance to pay off debts, consolidate loans to get better interest rates and clear up any credit problems. With decreased debt, you can free up extra money to save and invest each month.
Set Up Accounts to Manage the Money
Another important early task is to set up appropriate bank accounts and investment platforms to manage your inheritance money and maximise your returns over time. Using a financial advisor can help identify the right financial products and asset allocation strategies tailored to your personal financial goals and risk appetite.
As you get accounts established, be sure to set aside at least 3-6 months of living expenses in an easily accessible savings account. This will serve as an emergency fund in case you have unexpected bills or expenses that come up.
Strategic Investing Is Key
Once you pay off pressing debts and secure some reserve savings, strategic investing is the key to growing your new capital over the long run. Along with traditional assets like stocks, bonds, and mutual funds, there are alternative investments worth considering:
Property – Real estate investment trusts (REITs) provide exposure to property markets without directly purchasing a building. Rental income property can also provide consistent monthly income.
Gold and Other Metals – Buying physical gold bars or gold/precious metals funds can hedge against inflation and market volatility over extended periods. You can even buy gold online – this can be a very small part allocated to “treating yourself”, like starting a luxury collection of carved gold bars and ingots.
Peer-to-Peer Lending – There are online platforms that facilitate loans between individual investors and borrowers, generating monthly returns from interest payments. This also provides financial access for borrowers.
The goal is to own a diversified investment portfolio including a mix of stocks, bonds, alternative assets, and cash. This balanced asset allocation can mitigate risk while optimising overall returns.
Give Back and Treat Yourself
While strategically growing your capital should be the priority, it’s perfectly fine to allocate small amounts of the inheritance money to enhance your quality of living. Plan special holidays, donate to causes close to your heart, upgrade necessary household items, or even renovate part of your home. Build the life you want within reasonable means.
Receiving a financial inheritance provides a unique platform to secure your financial future. But it takes careful planning, getting organised, and making strategic investments tailored to your situation. If in doubt, consult qualified financial advisors to help steward your new capital over the long term. By making smart financial decisions, an inheritance can be life-changing.