When a person passes away and leaves an inheritance for their relatives, it is rarely their intention for the recipient to spend it all in a matter of weeks or months. It can be tempting to spend it all on fun shopping sprees, but it is more likely that the money was left to you so you can enjoy a more secure financial future. Investing most of the money wisely will not only make your life a little easier but also honor the memory of your relative’s legacy. Here are 7 smart ways to spend your inheritance, most of which are intended to enable you to make your wealth lasts as long as possible:
- Have some fun
While the majority of ideas in this article will be practical/sensible ways to spend your inheritance, it is highly likely that you will have some ideas which are fun and frivolous. Of course, you should be thinking of your financial future, but lump sums of money do not come around very often. Set aside around 10% of your inheritance to use for something you have always wanted to do/own. Depending on how much you have inherited, you could take a holiday, purchase a new TV, or buy one of the incredible new Alfa Romeo vehicles in San Diego. With a bit of indulgence behind you, you will have more of an incentive to take care of the rest of the money.
- Take out a private pension
While most of us will receive social security payments after our retirement, the payments are rarely enough to fund a comfortable life, so consider taking out a private pension. By placing a lump sum of money in a private pension and gradually adding to it over time from your income you can earn a lot more interest than you would by placing money in a checking account.
- Improve your home
Our home is the most important purchase we make during our lifetime, so it is wise to take care of it. Rather than cosmetic improvements, invest in changes that will add value to your home, such as energy efficiency measures, heating, ventilation, plumbing, renewable technology, and so on. Even if you do not plan on selling your home, you can then pass it on to your children or grandchildren in your will.
- Pay down credit card debt
Most people have some level of credit card debt, and with a lump sum you can free up more of your income and lower the amount of interest you will repay. The money you save on monthly payments can then be invested in a pension or savings.
- Pay towards (or take out) a mortgage
If you do not have a mortgage, this could be your opportunity to make your ambition of becoming a homeowner a reality by putting down a deposit on a property. If you already have a mortgage, making a large payment towards it (if you are able to) will reduce the interest and could mean you are mortgage-free much sooner.
- Invest in your education and career
Often the amount of money we earn in our career is dictated by the qualifications and education we received at the start of our adulthood. A lump sum of money could be used to get back into education and achieve the qualifications you need to get your dream job and a better salary. With more income, you will be able to enjoy more, save more, and leave more inheritance to your children.
- Set up an emergency fund
We all know that emergencies and unexpected costs will pop up when are least able to afford them. Consider placing a chunk of money into a savings account with enough money to cover at least three months of living expenses. This money could be a lifeline in the future and prevent you from needing to take out loans or credit.