Have you recently discovered that you’ve been given inheritance money? Whether it was expected or you received this money out of the blue, knowing what to do with the cash can be bewildering.
Receiving inheritance money after the death of a family member or someone you love is both emotionally and financially stressful. Indeed you’re likely to feel a mixed bag of emotions, from excitement to guilt which will likely lead to feelings of anxiety.
There’s a lot to consider, from what you have planned in your own life all the way to the complexities of inheritance tax. You’ll likely feel out of a sense of obligation to spend the money in a meaningful way. Moreover, there’s a good chance that the people in your life will have an opinion on what you do next, so it can be worth taking the time away from the noise to explore your options.
To help, here are some ideas to help you work out what to do with your windfall.
Pay Off Your Debts
If you went to university after 1998, it’s likely you took out a student loan at some point. Just under 1 million graduates have fully paid this debt off and the average debt among borrowers who finished their courses in 2020 was £45,000.
Or, you might have joined the thousands of people who buy cars on finance. Maybe you have taken out loans for emergencies like last-minute home repairs or you want to pay off your mortgage?
With these everyday debts in mind, you might decide to use your inheritance to start fresh and clear these monthly outgoings. If you do decide to do this, start with the high-interest loans so that you are getting rid of the most expensive repayments as quickly as possible.
Start Saving
Should you not have any debts that need to be addressed, putting your money into a savings account can be a safe place while you decide what your next steps are. Do your research to see what works for you here.
One useful option, if you need breathing space to think about your next steps, is fixed rate savings bonds. These are low-risk options and give you somewhere to store your money for a year or more.
Make An Investment
To see if you can build on the money you inherited, investments could be for you. This can be a high-risk move, however, so you’ll need to make sure you’re prepared to lose cash, especially if you try your hand at the trading markets or you’re considering launching your own business.
Property could be a good move. Again, there’s a risk of losing out if you sell the property at a loss, but if you look into buying to rent, there’s a chance you could see a steady flow of income.
Wait To Spend It
People often feel conflicted about spending money they inherited on something frivolous. Spending money on a lovely holiday or buying that dream car you’ve always wanted straight away may seem like a good idea at first, but often can make you lead to feelings of guilt. Indeed, blowing your inheritance money on lavish, impulse purchases may leave you regretting the decision later down the line. Moreover, you’ll likely burn through the money quickly.
Instead, wait to spend the money. Put your inheritance in one of those savings accounts we talked about earlier so you can think about your options. If you choose to spend it later on your dream holiday, it will be a more thoughtful decision and that’s what we’re after here.
As the New York Times so eloquently puts it, “the time and thought it takes to make the necessary decisions should indeed be an expression not of guilt but of gratitude”.
Give It To Charity
If you’re already in a good financial situation and can afford to, consider giving your inheritance money to charity, donating to a cause close to your deceased loved one’s heart.
Whatever you decide to do, take your time and make sure that it’s the right move for you.