After someone you love dies, you may receive an inheritance as a final gift. Gaining financial stability through inheritance is a unique opportunity.
As with any windfall, it may cause stress. Mismanagement won’t improve your financial health, and overextending yourself will damage it.
It is important to act slowly and strategically when inheriting a loved one’s estate. Here are some tips for improving your financial stability with your inheritance.
Get a high-yield savings account.
Inheritances come at a painful time. When you receive assets from an estate, you may experience grief, confusion, and stress, clouding your judgment when making financial decisions. Don’t make financial decisions until you’ve processed your loss and talked to a trusted advisor.
A high-yield savings account earns more than a traditional savings account. You can save it there until you decide what to do with it.
Consider how to use it.
You have many options for using your inheritance. You could:
- Build an emergency fund.
- Save for the future.
- Pay off debt.
- Purchase a house.
- Invest in your child’s education
- Start a business
Think about what’s most important to you. Financial planners can help clarify your goals.
Moderation is key.
Spend your inheritance only after deciding how to improve your long-term security. You could invest in your 401(k), pay off debt, or put it in something that avoids estate administration and probate.
Set a budget. You could upgrade your car, remodel your bathroom, go on vacation or enjoy a hot tub. Don’t make long-term purchases or change your lifestyle, such as a boat that requires maintenance and storage. You may be worse off if the inheritance is gone.
Handling an inheritance carefully is essential for building wealth. Do your research, avoid impulse spending and be careful when choosing investments.