InvestingPersonal Finance

Hanging Onto a Large Inheritance: Smart Investments to Set You Up

Without the proper planning, you can run through the money in your inheritance in as little as two years. Legacy Partners Financial Group President Jason Flurry sees this happen often enough to unprepared heirs.

They often make common mistakes, like treating the money as a gift, making poor investment choices, and blowing the cash on disposable items for themselves. If you’ll be receiving an inheritance, begin thinking about how to stretch your funds for financial security before that check is cut.

Take financial stock

As part of your planning, take stock of your existing finances. Maybe you have a high-interest credit card you’re paying down slowly, or you dipped into your rainy day fund. It’s acceptable to use some of your inheritance to take care of debt and replenish savings. But to put the rest of the money to work for you, you’ll want to come up with a comprehensive savings and investment strategy that accounts for your age, planned retirement date and needs. Do not deposit the check in your personal checking, since it will be tempting to dip into funds. It’s all right to treat yourself a little, but avoid spending more than 10 percent of your inheritance.

Don’t go it alone

Be wary of financial advisors coming out of the woodwork, claiming to have the expertise needed to invest your inheritance. A reputable financial planner will have a certified financial planner (CFP) certification. These individuals will be less likely to squander your money trying to make a quick buck. Certified financial planners can help you extend your inheritance by investing smartly.

Financial planner Christine Dugas recommends dividing the inheritance among several accounts to maximize earnings and spread out the risk. She suggests investing in stock mutual funds and bond funds, which tend to be less risky than stocks and offer some level of financial security. Stock funds have greater earning potential over the long haul, but a decline in the markets can leave you vulnerable if you do not have the financial security to wait it out. A good financial planner can advise you on the proportion of you money to invest in stocks vs. bonds to meet your financial goal, be it saving for the kids’ college funds or retiring in style 15 years from now. If your new earnings will put you in a different tax bracket, consider a tax-efficient index fund to minimize tax penalties, Consumer Reports recommends.

Life insurance is incredibly important to securing your financial future. Before deciding on a carrier, do extensive research or consult a professional. Site such as have resources to help you compare everything from car insurance to life insurance and income protection. Using these tools will help you keep all of your finances in order.

These steps will give you the knowledge needed to protect your money and grow your wealth. However, managing inheritance money is a lifelong project and you’ll need to give it the attention it deserves to really set yourself up.

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