How to Manage Inherited Money

So, you’ve just received a substantial chunk of cash from an inheritance. Maybe a family member included you in a will, or maybe your parents set up a trust fund for you that you now have access to. Inheriting money can help you live a happier, more stable life, but it’s very important that you manage it correctly so that you can get the most out of it. Here are some tips for how to manage inherited money.

Decide what your priorities are.
Unless it’s an emergency, it helps not to touch the money until you know what you want to do with it. Everyone has different priorities for their life, and you’ll need to evaluate what you can do to really make your money go the furthest and make you the happiest. If you are an entrepreneur, for example, you might want to put that money into your business, but if you’re more of a homebody, you might prefer to spend that money on a great place to live. You also might have certain financial responsibilities you’d like to use the money for, such as paying off debt. Once you have an idea of where your goals lie, it makes it easier to approach how you’re going to spend the money.

Plan for the future.
When spending large chunks of inherited money, it’s important to think about how much that purchase is going to help you in the long run, even if it truly benefits you right now. For example, you may decide that you want to focus your spending on improving your place of living, and so you buy a nice house right away. However, in a few years, your job relocates you to a new city, resulting in the need to sell the house at a potential financial loss. It never hurts to sit on the money for a few years until you can be absolutely sure that you’re doing the right thing.

Set a limit for regular withdrawals.
Even though you’d probably prefer to save your inherited money for big expenses, there will still be times when you need to use your inheritance to pay for general living expenses. Set yourself a limit for how much of this money you can use over a certain period of time to make it last. This amount is different for everyone, so you’ll have to decide what makes the most sense for you, whether that’s withdrawing a certain amount per year, per month, or even per week. By sticking to a rough budget, you’ll help make the money last longer over time.

Put some away for emergencies.
You never know when an emergency is going to come along, so it helps to put the money away to deal with it while you can. Decide how much you’d like to save – if you can, you’ll want enough for general living expenses for a month or two. Then, put it into a separate savings account where you won’t be tempted to touch it. You’ll be thankful to have it when an unexpected expense comes up later on down the road.

Consider investing.
One of the benefits of inheriting money is that you can actually use it to make even more money and take care of your family later on down the line. There are plenty of great investment opportunities out there that you can take advantage of, so if this is something that interests you, consider meeting with an investment advisor who can help you decide which opportunities provide the most value.