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5 Steps to Take After Receiving an Inheritance

Receiving an inheritance can be a mixed bag of emotions—simultaneous elation, grief, and anxiety. There are also a seemingly endless amount of investment decisions to make while estate planning: real estate, retirement accounts, paying off debt accrued from credit cards, etc. For this reason alone, you should enlist the help of a CERTIFIED FINANCIAL PLANNER™ professional as soon as possible.

It is important to clearly evaluate all your options and to have a deliberate plan for each dollar of your inheritance. We understand that there is an initial buying impulse after receiving an inheritance. However, it can be a slippery slope. It is often overlooked by individuals receiving an inheritance that the compulsion to spend is much different from money you had to work to earn. Southwestern Investment Group is here to offer support and guidance.

Here are five steps to consider taking after receiving an inheritance to help ensure that your money will be used with intention:

1. Take a Breath

Losing a loved one is a very complicated and often overwhelming life event, especially if a large inheritance is involved. The last thing you want to do is make pivotal decisions with far-reaching effects while you are in emotional distress. As always, taking care of you and your family’s well-being takes precedence over navigating your financial plan. 

We are likely to suggest that you place your inheritance in a market account, and then take a few weeks to focus on your personal affairs. The money and all the decisions that come with it will still be there when you are ready. 

2. Enlist the Help of Trusted Professionals

Just as you will need the support of your family and friends during this time period, leaning on the knowledge and guidance of trusted professionals is key to navigating estate management. 

First and foremost, you can greatly benefit from the aid of a financial advisor. 

Contrary to popular belief, a financial advisor’s job is not to tell you what to do with your money but to listen to your spending preferences and goals, assess your financial plan as a whole, and then offer their guidance. Many people are tempted to fire their parents’ financial advisors and hire their own upon receiving an inheritance, but we recommend consulting with them to gain better insight into the entire financial situation.

3. Make a Plan

A wise plan involves giving every dollar of your budget (and inheritance) an assignment. This prevents any impulse decisions or surprise account balances. Following a “give-spend-save” model, consider evaluating your financial situation with a financial advisor and then dividing your inheritance accordingly. Some allocation options to consider include the following:

4. Prioritize Eliminating Debt

With an inheritance, you can eliminate years worth of debt quickly and without the struggle of tightening your belt or spending months of saving income. Eliminating debt is key to financial confidence, as it can be a quick way to increase cash flow. 

When evaluating your overall debt, you should prioritize debts with the highest interest rates, such as credit cards. One thing to be certain to steer clear of? Incurring any additional debt during this time. It might be tempting to work a new car payment into your newly expanded budget, but this can significantly tie-up your inheritance and squander any investment opportunities. 

5. Invest Your Inheritance

Your inheritance has the potential to positively impact the rest of your life—and maybe even your children’s lives. This is why it is important to give your money the opportunity to grow. After prioritizing contributing to your retirement accounts, consider spreading your money across diversified investment vehicles like mutual funds or growth stocks. This is another instance in which a financial advisor can be of excellent guidance. Another potential investment opportunity would be to buy real estate with cash—remember, no more incurring debt!

Whatever it is you decide to do with your inheritance, it’s important that you make informed choices with trustworthy professionals who truly care about helping you make your family’s legacy truly count.

Southwestern Investment Group provides financial guidance with integrity, helping you to make educated financial decisions with confidence. Contact us today to learn more about estate management.

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