5 Smart Ways To Avoid Wasting An Inheritance
Any inheritance is bittersweet, because most people would say that while a nice piece of the estate left in a will can be comforting, it still requires you to lose someone close to you. The ideal, perhaps, is to learn of a rich long lost relative with no other close connections who left you an entire ultra-valuable estate. Unfortunately, that’s not so common.
It’s crucial to consider how to avoid wasting an inheritance, ensuring that any financial decisions support your long-term goals.
If we are named in an inheritance, however, it’s important to be mindful with it. In other words, learning not to waste it is important. For some, an inheritance can offer a real reprieve, like letting them pay off their student loans, or paying the rest of their mortgage. This can be a worthwhile investment of course, and certainly helpful for your personal finances.
Understanding how to avoid wasting an inheritance can transform it from a fleeting benefit into lasting financial security.
That said, it’s also easy to struggle handling more money than you’re used to at one time. This way, it’s easy to miss the opportunities, or suffer opportunity costs, that you hadn’t anticipated. Let’s explore what those could involve, below:
Your strategy should always include ways to avoid wasting an inheritance while still honoring your loved ones.
Take A Breather Before Making Any Decisions
It’s usually a good idea to let things settle before immediately using your inheritance, even if the first wave of relief or stress or excitement can cloud everything a little. So, rather than rushing to pay off this or that or moving money around the minute it lands, it helps to just leave it alone for a couple of weeks at the least, while everything is finalized.
This pause can help you avoid wasting an inheritance by allowing you to think strategically about your options.
People often feel like they need to do something big straight away, but just waiting and letting yourself think things through properly will generally work out better and help you avoid missing out on a good opportunity you could have used the money for. Nothing’s lost by holding back a little. Maybe instead of paying off your mortgage completely right now, you could settle for much more flattering repayment terms when you come to renegotiate the rates, thanks to a sizeable payment, for example.
Talk To Someone Who Knows What They’re Doing
Consulting professionals will better prepare you to avoid wasting an inheritance and make informed decisions.
You can be financially literate, but that doesn’t mean you’re highly aware of what to do with large sums of money or investments. So it’s worth having a quiet conversation with someone who deals with this kind of opportunity and can give you advice. That might be a financial advisor, or an accountant, or someone in your family who’s dealt with estates before and knows how the process is best suited for your needs.
They won’t necessarily tell you what to do, but they can explain the options clearly and that alone helps stop bad decisions from happening. You may also look for more long-term investment goals, such as an all-in-one Personal Capital alternative that allows you to use your inheritance and your salary to build towards better investments and diversify your portfolio through them. Perhaps you can then turn a larger inheritance into more passive income that helps you gain more breathing room each month. It’s a good choice.
Consider how to avoid wasting an inheritance and seek out opportunities that align with your financial goals.
Think About What It Would Feel Like In Five Years
When we get money, it’s very easy for our brains to become short-term. That’s not always a bad idea, if you need a new car right now, an inheritance can be a nice little benefit to keep your lifestyle going.
Focus on using your inheritance wisely to avoid wasting an inheritance, investing in your future instead.
However, if the whole thing is blown on quick fixes or a lifestyle bump that fades, there’s usually a little regret left behind. But if you use it for something that keeps paying off in the background, or takes some pressure off your future, then odds are you’ll feel glad you didn’t rush into anything short-term.
You might make a few investments, for example, or potentially settle a loan you had so the interest doesn’t bite you. You may take out a large loan for a specific necessary life purchase and pay it back sooner to raise your credit score more effectively, for instance. All of this can be a welcome change to assist you, but not just now.
These decisions can help you avoid wasting an inheritance while enhancing your financial stability.
Keep Some Of It Aside, No Matter What
No matter how solid the plans might seem, having a chunk of it untouched in a savings account or ISA or wherever feels like a bit of insurance. Unexpected life events do happen, and that bit you kept back might be the part that saves you later. Of course, keeping some aside also means learning how to best avoid the tax you legally can.
A strategic safety net can help you avoid wasting an inheritance and prepare for any unexpected expenses.
There’s always a temptation to use every penny straight away for the best possible outcome, but just knowing there’s still a foundational bit of savings left somewhere, potentially accruing interest in your favor, will give you more peace of mind. No financial advisor is ever going to tell you that having a bit more of a safety net is bad planning, even if they might recommend one saving account over another..
Be Cautious About Giving Money Away Too Fast
Being cautious will help you avoid wasting an inheritance and ensure that you can share it thoughtfully.
With an inheritance in which you received some but others little, there’s pressure to hand a bit out, perhaps for helping someone else or just feeling like it would be generous to share it. That’s a nice instinct, but it can be a poor decision if things aren’t fully thought through.
Once it’s gone, it’s gone. So even if giving some away is part of the plan, there’s nothing wrong with waiting a while and making sure it’s the right move, or to make sure someone earns it with a stipulation. You may have some saved for your child’s college fund, but only if they achieve certain grades at the school level.
Delaying generosity could be key to avoid wasting an inheritance and ensuring your own financial security first.
If you can, as with any new wealth, try not to tell too many people you have it. Doing so may come with certain requests or obligations that could cause friction, as they may not understand why you’ve chosen to wait and invest, or follow the advice on our site, compared to immediate spending.
Try Not To Feel Guilty About Using It
Balancing guilt and responsibility is part of learning how to avoid wasting an inheritance effectively.
Grief and guilt will generally come together thanks to the qualifiers we laid out in our introduction, and especially when there’s money involved. It’s quite usual to feel unsure about spending it at all, or to feel strange using money that came from someone who’s no longer here. But that’s normal, and as we said, there’s no rush now. You can still honour someone’s memory while also improving your own situation with what they left. They also left it for you to exercise your best judgement with, so as long as you don’t waste it on spurious spending, there’s little you can do “incorrectly.”
With this advice, we hope you can avoid wasting an inheritance, by giving yourself the freedom to plan..
Ultimately, these insights are meant to empower you to avoid wasting an inheritance and create a meaningful legacy.
FAQs:
Understanding these principles can help you avoid wasting an inheritance while making the most of what you receive.
What’s the first thing I should do after receiving an inheritance?
The first step is to wait. Let the emotions settle and avoid any major financial moves for a few weeks. This gives you time to assess your options rationally.
Remember, the goal is to avoid wasting an inheritance by taking the right actions when the time comes.
Should I pay off all my debt with an inheritance?
Not always. While paying off high-interest debt can be smart, using the money strategically—such as investing or refinancing for better terms—can often yield better long-term results.
Strategically using your inheritance is essential to avoid wasting an inheritance and improving your financial future.
Is it necessary to hire a financial advisor after inheriting money?
Yes, consulting with a financial expert can help you explore investment opportunities, understand tax implications, and build a sustainable plan tailored to your goals.
Hiring an expert can certainly help you avoid wasting an inheritance, guiding you toward the best decisions.
Can I give part of my inheritance to family or charity?
Yes, but do so thoughtfully. Set boundaries and conditions if needed, and ensure that any giving aligns with your long-term financial security.
Thoughtful giving is essential to avoid wasting an inheritance while still supporting those you care about.
How do I deal with guilt when spending inherited money?
Recognize that using the inheritance to improve your life isn’t dishonoring your loved one. Responsible, meaningful use is a valid way to preserve their legacy.
Ultimately, it’s about finding ways to honor your loved one’s legacy while avoiding wasting an inheritance.
