Coming into a large, unexpected sum of money can be life-changing, but often people do not know what to do with this money and may end up mismanaging it or indulging in ill-advised spending. So, what should you do if you suddenly inherit a large amount of money? Read on to find out.
Open a Fixed Rate Bonds Account
One of the best options for a windfall is a fixed rate bonds account. If you do not mind locking some of the money away for a while, then a fixed rate bonds account is a brilliant way to build wealth over the long-term through compound interest. Inheriting money is always a good opportunity to grow wealth and a fixed rate bonds account is one of the best ways to do this right now.
Pay Off Large Debts
Another sensible use of inherited money is to clear your debts. Although it may not be the most glamorous or exciting use of the money, you will find that it is one of the smartest because you can then have a fresh slate and start to build your own wealth. Debt will follow you around and always impact your finances, so being able to clear this can really make a big difference to your life.
In particular, credit and debit card debt should be paid off as the interest that is paid is likely to be higher than any interest that you will make on a savings account (especially right now). Once you have cleared your debt, you can then build an emergency fund of 3-6 months’ worth of expenses, so that you can avoid taking on debt in the future.
Although you should always be sensible and look for ways to maximise the money that you receive, it is still important to spend and enjoy the money. It is often recommended that you avoid making any large financial decisions right away and instead get used to having the money available to you. Going on a nice holiday could be perfect, as it gives you the chance to spend time reflecting on the best way to use the money whether this is going towards buying a property, self-development, paying off debts, investing or supporting loved ones.
These are the best ways that you can use an inheritance that you receive. It is hard to know what to do when you receive a large amount of money unexpectedly and it is important that you are smart and sensible so that you can make good use of the money and improve your life. It is important to enjoy the money, but you also need to make sure that you are thinking ahead and using it in the best possible manner.