So you’ve just inherited a large sum of money, now what?
In the finance world, this inheritance is what we call “money in motion”. Your money isn’t saved in the bank, or invested in stocks, it’s in motion and you need to plan how to best utilize this money to your advantage.
It is one my goals as a wealth management advisor to help individuals manage their “money in motion”. If you’re not familiar with the term, “money in motion” refers to money that is in transition, or hasn’t been given a purpose. Some examples of money in motion include inheritances, switching jobs, or even the sale of a home.
Before you sit down to figure out how you’re going to manage the money, I want to give you some advice on how to make that plan. I’ve seen people make their inheritances last a lifetime, and I’ve seen others blow through it almost instantly. I don’t want to see you make that mistake, let’s make this money last a lifetime.
Here are three of my best money management tips for recent inheritors.
Slow Down & Reflect
I’ve seen heirs with great money management skills that make their inheritance last a lifetime and beyond, but I’ve also seen people spend the money before it’s even reached their pockets. This is unfortunate for two reasons. Now they have no money left for saving and investing for the future, and they just blew through a sum of money with little to no regard for the hard work someone else put in to earn it.
Before you even make a plan for your inheritance, spend some time to reflect. Reflect on the hard work and sacrifices your loved one put in to accumulate this wealth. Just because you didn’t have to put in the work to earn it doesn’t mean that someone else didn’t, and really for that reason you should value it even more highly. When you recognize the value of every dollar, it will help you fight the urge to spend your new fortune on things that only last a moment or that you most likely don’t need.
Make a Plan
Here’s where the money management comes into play. I’m not saying you can’t spend some of the money, but it’s important to have limits. How much will you spend? How much will you save? How much will you invest?
These are very important questions to consider. Making wise money management decisions now can ensure that this inheritance helps you pay off your current debt, put a down payment on a house in ten years, and have a healthy amount saved for retirement when you eventually need it.
Honor Your Loved One
Don’t spend it all on you. Use this money to honor the person who gave it to you. Did they have aspirations to travel the world? Were they passionate about a specific charitable organization? Use the money to take the trip that they couldn’t, or make a positive impact on others. The money won’t last forever, but the memories of traveling the world or doing good, and the memory of being able to honor your loved one will be something that lives with you forever.
I understand that money management isn’t easy, especially when you’ve come into a fortune that you didn’t have the day before. But it’s important to have a plan for money in motion. When money isn’t tied down somewhere, it’s easy to make the mistake of spending too much. And it can happen fast!
If you need help managing an inheritance, let’s meet. I specialize in wealth management, and can help you develop a plan that will make that money last a lifetime. Schedule your complimentary call, or in-person meeting today!