Receiving an inheritance, especially an unexpected one, might leave you feeling a little overwhelmed by the options. Ideally, the money should bring you closer to financial independence, but many heirs don't know how to handle a windfall and end up no better off than they were before.The first priority is to develop a strategy. "Most people run through an inheritance in two years or less," says Jason Flurry, president of Legacy Partners Financial Group in Woodstock, Ga. In his experience, the first mistake people make is they "blow the money on stuff for themselves." The second mistake is that they choose bad investments because they consider the inheritance to be found money and consequently take on too much risk.A dollar is still a dollar, whether you or your benefactor earned it. So before rushing out to buy the big-screen television or invest in the latest hot stock, develop a game plan.
Receiving an inheritance, especially an unexpected one, might leave you feeling a little overwhelmed by the options. Ideally, the money should bring you closer to financial independence, but many heirs don't know how to handle a windfall and end up no better off than they were before.
The first priority is to develop a strategy. "Most people run through an inheritance in two years or less," says Jason Flurry, president of Legacy Partners Financial Group in Woodstock, Ga. In his experience, the first mistake people make is they "blow the money on stuff for themselves." The second mistake is that they choose bad investments because they consider the inheritance to be found money and consequently take on too much risk.
A dollar is still a dollar, whether you or your benefactor earned it. So before rushing out to buy the big-screen television or invest in the latest hot stock, develop a game plan.
Flurry suggests starting with an inventory of your financial life. Take a close look to determine if you have adequate insurance, are carrying too much high-interest debt, are on track for retirement and have an emergency fund that will cover you for at least six months or a year. "Make sure your foundation issues are in place," he says.
Everyone's financial game plan will look different depending on age, level of debt, whether they are supporting children or parents, and how they want to live in retirement. The point is to gain financial stability in the pressing issues and put the remainder toward reaching your goals. Some of the possibilities include the following.
Remember that there's nothing wrong with buying a luxury item for yourself with some of the money, Flurry says, but the reward will be sweeter if you've figured out your long-range financial plan first.
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