Losing a family member or friend is an absolutely devastating event. Emotions are often in even greater turmoil should such a loss result in a sum of money being inherited, since the amount is often so large that is has the power to completely transform the receiver’s life. People can often feel pressured then, to spend inherited money sensibly as a mark of respect to the deceased and their generosity.
If you have received some inheritance money yourself, you have five main ways in which you can spend it. It is quite possible that you have be given enough money to select more than one option from the list below but whichever you decide to go for, be sure to give each much consideration.
Option #1: Don’t Think; Just Spend
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It might be the case that you were living uncomfortably close to the breadline before inheriting your windfall and this means you could be tempted to buy yourself a lot of items which were previously out of your financial reach. This frivolity is especially likely for those heavily grieving the passing of their loved one, since high emotions can see people attempting to self-comfort through spending, and thinking less sensibly than they usually would.
Whilst the purchase of designer handbags, a luxury vehicle, Caribbean holidays, and/or the latest gadgets and gizmos might provide temporary console, individuals who don’t seriously consider what they are spending could eventually end up even more miserable due to the regret of not spending their newly acquired funds wisely.
An inheritance of $80,000 – for example – might seem like an endless sum to someone who has had very little money previously but those (comparably minute) $100 spends here and there do eventually add up and the total could dwindle much quicker than first thought.
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Option #2: Climb the Property Ladder
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Many people choose to use their inheritance money to climb aboard the increasingly-exclusive and expensive property ladder. This is a very wise decision should the selected property be a good investment (i.e. its value will increase over time) and if the inherited amount and/or the individual’s wages are large enough to cover the asking price/all of the necessary mortgage payments.
Making a hasty decision is the biggest risk in regards to the purchase of property in the wake of inheritance. People often feel their money “burning a hole” in their pocket and so quickly decide to purchase the house in which they and their family already live, despite there being better investments available on the market. Those attracted to this option should be sure to shop around!
Remember that you don’t necessarily have to habituate any property you decide to buy – purchasing a home and renting it out is a great way to make money (which you could also put towards the cost of the mortgage.)
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Option #3: Start Your Own Business
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Like the majority of people, it is quite probable that you have dreamed of someday owning your own business but have – until now – lacked the funds required to launch such. Inheritance money can see you finally realising this dream but doing so does not come without risk. Starting a business which eventually fails can leave a person with even less money than they had before receiving their deceased loved one’s monetary gift!
As well as a lack of money, many individuals do not have the necessary business know-how required to become entrepreneurial also. This does not matter too much if the business idea itself is a promising one, since the services of advisors can be employed to help ensure you adhere to all essential protocol and to help you to draw up a meticulous business plan. Accountants can also be hired if need be.
A contingency plan is imperative for ensuring that a new business does not fail – some of your available funds should be allocated to allow for unforeseen emergencies and additional costs.
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Option #4: Go Back to School
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Do you regret studying fine arts at university and wish you had decided to undertake a business degree instead? Perhaps you left secondary school at an early age and know that you should have taken your education further? Going back to school isn’t always an easy option for adults considering the often-high fees involved but such are not a problem for an individual who has inherited a significant sum.
Going back into education doesn’t necessarily mean you’ll be in the classroom – vocational courses in industries such as catering or construction can also provide you with more career options and/or the qualifications necessary to start your own business venture.
You do run the risk of starting a course and then later deciding it isn’t for you (you are likely to still incur fees if you do decide to leave midway) or spending three years to attain a certificate you later deem to be “useless” but attaining such is never a bad thing when it comes to your CV.
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Option #5: Restrict Access with a Premium Bank Bond
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As previously mentioned, some individuals are a little too keen to spend their inheritance money once it has been received and this can see poor spending decisions made. If you require a little thinking time and/or you would like to reserve a certain amount of your money for use later in life then fixed rate savings bonds are ideal.
Fixed rate interest bonds prevent you from accessing your money for a certain amount of time, whilst providing a fixed interest rate. A one year bond offering 6% interest for example will prevent the customer from accessing their funds for twelve months and should a total of $1,000 be placed into such an account, an additional $60 will be added to the balance once the fixed period has ended. It should be noted that whilst fixed rates are often beneficial when the economy is struggling, they can also be a detrimental should it unexpectedly boom.
You should be 100% sure you do not wish to access your money before entering funds into such accounts. Not only is this because accessing your balance is highly improbably but also because those premiums that do allow withdrawals charge a ridiculous amount for the privilege and this will see your inheritance total decrease all too quickly.
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Katherine Black recommends Vanquis HYA for some of the best fixed rate savings bonds available.