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So, You’ve Inherited Money – Now What?

If you’ve been lucky enough to inherit a large sum of money, you probably experienced a flurry of emotions, including excitement at the possibilities it opens up for you and your family. However, once the initial elation wears off, it’s common to feel a bit of trepidation and confusion about how to properly manage your new fortune, especially if you don’t consider yourself particularly savvy when it comes to money.

Luckily, you don’t have to be a finance expert to make your inheritance last. Read on for six simple tips to help you make the most of your newfound financial freedom.

Tip #1: Don’t Spend Impulsively

It’s human nature to get a bit starry-eyed when we inherit money, with our thoughts tending toward flashy or extravagant purchases that were just pipe dreams previously. Before you buy that new home or splurge on that expensive vacation, though, take a beat. Rushing into big purchases before taking the time to really evaluate your financial situation is a recipe for fiscal disaster. So, think before you spend. Take the time to review your income and assets, then – more importantly – assess your expensesdebts and liabilities. Once you have a true overview of your finances, you can determine whether a big, exciting purchase really makes sense for you in the long run.

Tip #2: Tackle Your Debts First

Once you’ve got a fundamental understanding of your overall finances, focus on your debts first. Any high-interest debts, like credit cards, should be your first targets. If you have so-called “good” debts, like student loans, consider paying them off, too. While this isn’t a particularly exciting use of your inheritance, it’s an important step in planting yourself in firm financial ground for the future. If you use your inheritance to pay debts off now, you can avoid paying quite a bit of interest in the future. You’ll also reduce your monthly expenses and free up cash flow to be used in other ways.

Tip #3: Prioritize Smart Investing

Tackling your debts will set you up to take the next step in really putting your inheritance to work for you: investing. Automate the process of saving and investing with a “pay yourself first” mentality in which the first thing to come out of your monthly income is a contribution into your 401(k), Roth IRA or high-yield savings account. Regardless of which type of account(s) are best to meet your needs, your objective should be to give your inheritance the opportunity to grow and continue to serve you over time. If you’re unsure which investment vehicles are right for you, speak with a financial advisor who can provide expert guidance based on your personal goals.

Tip #4: Have a Little (Thoughtful) Fun

Once you’ve done the hard work of dealing with debts and properly investing your assets, let yourself enjoy your newfound financial freedom! The key is to do this thoughtfully. Your initial reaction may be to put your money to work for the people you love – paying off your sister’s mortgage or setting aside tons of money for your kids’ future college expenses – and those may be truly worthwhile uses of your inheritance. However, let yourself live a little, too. Buy your dream car, plan that long-awaited Mediterranean cruise for the family or simply have some fun at the mall refreshing your wardrobe. You’ve evaluated your financial footing and know what you can afford, so splurging a bit is completely fine – just don’t overdo it.

Tip #5: Do Some Estate Planning

You were blessed with an inheritance and, if you play your cards right, you can bless your heirs or a deserving charity, too. Take some time to think about continuing your legacy by properly managing your money so that you can pay it forward. This honors the hard work your own benefactor did in building a fortune, and it means you can provide a significant benefit to loved ones or a cherished cause. Talk with your financial advisor about options like a family trust or a charitable gift annuity to see if they may be right for you.

Tip #6: Don’t Write-Off an Inherited Financial Advisor

Research from Investopedia shows that up to 90 percent of heirs immediately switch financial advisors. However, this can be dangerous. The financial advisor your benefactor used either helped them get rich or ensured they stayed that way, meaning they may have a lot of useful advice to share with you as the heir to substantial assets. Rather than writing off their continued services, take the time to learn from them before making a possible switch to someone new. If the time comes when you’re ready to change advisors, be intentional about choosing someone who takes the time to answer your questions and who truly understands your financial needs and goals.

If you’re a recent heir and unsure of what to do with your new money, know that you can’t go wrong by following the six simple tips above. Making smart choices with your inheritance is the best way to ensure it lasts throughout your lifetime and into the future for your heirs, too.


Paces Ferry Wealth Advisors, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”).   This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.

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Atlanta, GA 30339

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