An inheritance can give your finances a major boost, but knowing what to do with this money isn’t always easy. If you’re not careful, you could end up squandering your newfound wealth and regretting your decisions further down the line. To help ensure this doesn’t happen, here are a few pointers that should enable you to make the most of your inheritance.
Start with a financial review
Firstly, it’s a good idea to conduct a thorough review of your finances. By taking an in-depth look at your incomings and outgoings, you can get a clearer idea of how the money should be used. For example, if there’s a shortfall in your household budget, you may benefit from investing your inheritance to generate an income that enables you to cover this.
However, if you have any high interest debts, it’s worth paying these off first. Bear in mind that the interest you’re required to cover on these debts could exceed the gains you make from any savings or investments, so it makes financial sense to repay the money you owe. You might not want to pay off all your debts, but it makes sense to unburden yourself of high interest credit cards or other costly finance agreements.
Set aside money for the future
It’s crucial to think about the future too. For instance, putting some of the money aside for your retirement could help you to enjoy a better standard of living in your post-work years. You may decide to use a portion of your inheritance to purchase a fixed annuity or you could opt for a different savings or investment solution. You have the option of investing a lump sum or setting aside money each month to increase your retirement wealth. Products like RL360° Quantum can help you do this while maximising your return. A regular, flexible savings policy, it provides you with access to a range of high-quality funds. If you have used some of your inheritance money to pay off debts or cover other expenses, you should find you have more flexibility in your budget to make regular payments into investment products like this.
As well as giving you more money for your retirement, paying into savings or investments solutions can help you cover a range of future expenses, such as education costs for your children or property improvements.
Make sure you have an emergency fund
If you don’t already have one in place, it’s wise to use some of your inheritance to set up an emergency fund. Ideally, this should have enough money in it to cover at least six months of expenses. The money should also be kept in secure and liquid investments to ensure you have access to it whenever you need it.
Seek expert advice
Because there are so many options to consider when you receive an inheritance, it’s generally a good idea to seek expert advice from a professional financial adviser. These specialists can help you to clarify and achieve your goals.
Whatever you do, don’t rush the decision making process. By taking your time and considering your full range of options, you can ensure you make the most of the money left to you.