Many people who receive an inheritance don’t see it coming. And when they do receive that inheritance, financial and legal concerns often are the last things that are on their minds. Generally speaking, when one receives an unexpected windfall of cash through (often) sad conditions or times, dealing with all the responsibilities that come with being an heir is not usually a priority during this emotional time. While we may not want to deal with details of our inheritance at all right now, there are a few things that one should, at least, be sure not to do.
Don’t cash it all in at once!
This one makes sense for obvious reasons. From an “I want it, I want it, I want it!” perspective, it might not, but that’s not a rational voice to listen to. Though it is an undeniable fact that when your bank account goes from $0.002 to $200,000, it can be very enticing to discover a strong desire to spend your money. After all, it is your money. Who is to tell you that you can’t buy that new car, house or exotic pet giraffe, right? Just remember, however, that you should make sure you are paying for all of your basic expenses before you elevate your lifestyle to OG-status with a brand-new Maserati.
Take care of your basic financial needs before you do anything else. And make sure that you know all of the additional costs that come with buying a new house or new car. In short, do your homework! For instance, a new house comes with new expensive property taxes. And a new expensive car comes with new expensive car insurance!
Investments should be researched
Do your homework. I know, I know, it feels like you are back in grade school right now. But, without conducting the research necessary to responsibly invest in a large business, hitching your fiscal wagon to a friend’s business might be a big, big mistake. Again, it might be enticing. After all, your bank account just went from dud to star, but, hate to beat a dead horse here, it still is a very good idea to do your homework. And do it well.
Your friends, no matter how good of pals they are, might try to sucker you into an investment. Not to say that these investments are horrible ideas, but you should definitely do your research and figure out a set standard or policy on how to evaluate these business opportunities. Remember, do not put all your eggs into one basket. That is investing 101, after all. If you do your due diligence, there may be some excellent business investments out there for you, for sure. But be slow and steady in making any decisions. After all, you don’t want to end up losing all your money in one failed investment venture due to poor planning and poor research.
“Can you lend me some money…?”
You can probably guess that when you acquire some large, out-of-nowhere windfall of cash, you might have otherwise well-meaning family members or friends coming to you in need or just in-want. Sometimes you might find it is easy to say no to these people (depending on which ones). At other times, to that best friend you’ve known since kindergarten, it might be way harder to say no, right? But think of it this way: Social Security continues to have an unknown and largely unknowable future, and it is becoming more and more difficult to secure for your retirement (especially considering that more and more of the contributions are coming from you yourself now). As I am sure you have heard before: You gotta be looking out for number one.
If you can loan money to family or a friend, and still stay on the straight and narrow with your financial plans, then by all means go for it. But just make sure that this is the case before you start making it rain loans on your family and friends. If it is just too much stress, you might want to draw a definite line in the sand. As in, tell all who ask: “I don’t do loans.” Or “I never loan more than X amount.” It might not be a bad idea to get the help of a financial advisor. That way, you don’t have to make these hard decisions all by yourself.
Being too frugal
Just as you shouldn’t be running around throwing money at every friend, family member, and business venture that you see, it is equally important to take advantage of certain opportunities that you judge are sound investments. Leaving money in the bank can be a pretty bad decision, too. Leaving money in the bank means taking very little risk but it also means gaining very little reward. Giving your money a chance to grow and to compound might be a good idea, too (provided that you do your homework and plan carefully for your investments).
It might sound like a great thing to get an inheritance, especially when you have been dumpster diving for dinner for the last six months. But, having said that, it often happens that when we get a huge windfall of cash, we can get a little bit over-eager with the money and not make such smart decisions. Remember to be careful with your money. That involves not making bad investments, lending it all away to family and friends, and, as strange as it sounds, not forgetting about all the prudent and money-making investments that are available to you now. If you are not sure what those are, remember, you can always chat with a financial advisor for some guidance.
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