You Just Received an Inheritance. Now What?

The 3 most important steps to make the most of your windfall.

1. Put it somewhere safe and hit pause.

First things first. If you inherit a cash amount, place it somewhere in an insured account like a money market account. These accounts are mutual funds that invest in cash equivalent securities, not stocks, so they are a stable and good bet specifically for short-term investing.

Then, take a moment.

Research has shown that people who come into “sudden” money, such as a lottery win or inheritance, tend to treat that money differently than earned money (namely spending it). Many are no better off financially within two years.

But you can avoid making a mess of an inheritance just by slowing down, not making impulsive decisions, and pulling together a plan.

If you’ve inherited the windfall from the loss of a loved one, you’ll have a complicated brew of emotions that might include grief, guilt, and relief. The money is a beneficial gift, but it represents a loss, too. So let your emotions settle before moving on to make big financial decisions.

2. Pay off your debts.

Odds are, you’ve got some, somewhere. The average American is carrying $38,000 in debt, not including mortgage loans. And it comes at a price beyond just high-interest payments—carrying debt can hurt your credit score, contribute to fatalist spending (“why not, I’m already in debt”), add huge stress and anxiety, and leave you less able to build personal wealth.

As tempting as it is to start spending that money in your head, if you have debts such as medical, credit card, or student loan debt, then you’re spending money you don’t have. Consider this inheritance a chance to put yourself on the path to financial freedom by paying off your highest interest debts first.

3. Hire an advisor and get planning.

Once your money is safe and accounted for, your debts are paid, then the real empowerment and joy of financial management can begin. This is where it pays to hire a financial advisor to help you strategize the next steps. These steps could include:

• Paying off your mortgage
• Investing/saving for retirement
• Creating a legacy for your loved one or your own family
• Saving for college for children
• Improving or buying a new home
• Financing a change of career or lifestyle
• Enjoying bucket list items such as gifts, experiences, travel, etc.

At Aspen Wealth Strategies, we can help you organize thoughts, prioritize dreams, and make the most of your financial cushion so that it works to serve you long into the future. Contact one of our planners today to get started on building a better tomorrow right now.