How To Make the Most of Inheritance Money

canstockphoto26481641When you find out you’re the beneficiary of a loved one’s money, whether in full or a portion, it can be a time that’s full of different emotions. There can be feelings of sadness at the loss of someone you love, of course, but it can also feel like you’re getting a new opportunity because of the inheritance you’ll receive after the probate process has come to an end.

You may be left wondering what the best thing to do with your inheritance would be, whether it’s thousands of dollars, tens of thousands of dollars, or even more.

You want to make the most of your money, and ensure it works for you, not only for yourself but also to honor the person who left it to you.

Below are some personal finance tips you can follow to make sure you’re maximizing inheritance you might receive.

Plan Carefully

Receiving an inheritance may be something that happens to you only once in your lifetime, so it’s important that you don’t frivolously spend the money if you’re lucky enough to receive a lump sum of cash.

Instead, it’s important to think about ways you can use the money to benefit your life in the long-term, rather than spending lavishly on something that you may only enjoy in the short term.

Let the emotion of the probate process and the death itself wear off a bit before you make any major plans.

Create An Emergency Fund

If you don’t already have a health emergency fund, getting an inheritance can be a very good time to do that. That should be your priority, and you should try to save at least enough to cover six months of your expenses.

When you use your inheritance to create an emergency fund, you’re providing yourself with peace of mind, and you’re giving yourself a sense of long-term value.

Get Rid of High-Interest Debt

If you already have enough liquid reserves to cover six months of living expenses, you might think about using inheritance to pay off some of your higher interest debt. Car loans and credit card debt tend to be a good place to start.

You can put your inheritance to good use by alleviating some of your financial burdens, and you’ll also save money in interest payments over the long-term.

Fund a Retirement Account

Retirement accounts can be incredibly valuable, and they often have tax benefits as well. You can use your inheritance from a loved one to create a sounder financial future for yourself, which is likely something anyone who loves you would want for you.

As an additional note, many people wonder whether or not they should pay off their mortgage when they receive an inheritance. Financial experts tend to warn against this because mortgages have some of the lowest interest rates compared other types of loans and debt. Mortgages also have tax deductible benefits.

It may be better to skip paying off your mortgage if you receive money from a friend or family member who passed away, although of course, you should consult with a financial professional to make the right decision for your individual circumstances.