Managing an inheritance can be an emotional challenge, so it is wise not to make impulsive decisions. How you manage these funds can make a huge difference in your personal finances. Here are a few suggestions:
Park the cash in a liquid account
Before making long-term decisions, deposit the funds into a money market account or share term certificate for three to six months. Let the money sit while you work through your time of grief. Take time to consider all of your options for spending and investing these funds. If you are not comfortable managing a large sum of money, seek the advice of a trusted financial adviser, who can help you develop a financial plan to achieve your goals. The last thing you want to do is go on a spending spree without a plan.
Reduce debt and increase savings
Pay off credit cards, personal loans and automobile loans. Next, consider paying outstanding mortgages and home equity lines of credit. Once your consumer debt is paid, build an emergency fund of three to six months of living expenses.
Make retirement contributions
Contribute the maximum amount allowable to a Traditional or Roth IRA. You can never put too much money away for retirement.
Have some fun
After all the bills are paid and a savings plan is established, allocate a certain amount of money to fun activities. Take a trip, go shopping or purchase a new toy. Just be sure to set a target amount to spend and stay within that budget.
Article provided by Local Government Federal Credit Union.
Contact an estate planning attorney for additional guidance.