What should I do if I inherit money?
Receiving money through inheritance can be a huge financial opportunity, as well as an obstacle. Of course, it can also be an emotional ride as it means that you have lost someone special to your heart. If you are the recipient to someone’s will, it basically means that soon you will be getting an undetermined amount of money. However, the big question is now that once you inherit a significant amount, what should you do with the same?
It makes sense to develop a financial plan to avoid wasting your inherited money. This is done so to avoid spending on useless things that do not require your funds. Other investors often end up making poor investment decisions and invest it mutual fund investments that offer deteriorating returns. So, what should you do avoid this situation? This article aims to act as an investment guide for investors to successfully and properly use their inherited money. Read on to know the do’s and don’ts associated with inheritance of money that can help you decide the correct way to deal with inherited money:
- Do make a lumpsum investment in your desired mutual funds. Invest in mutual funds after carefully analyzing your financial goals, risk profile, and investment horizon.
- Do consult a financial advisor who can guide you with your mutual fund investments. This is especially important if you are not in control of your expenses.
- Do try to clear your high-rate interest loans and debts such as personal loans, credit card debts, mortgages, home loans, etc.
- Do contribute towards your child’s higher education and college fund if you have any.
- Do try to save a part of your inheritance money for your retirement. You might think that your retirement is quite far and you have ample time. But remember, the sooner you start, the bigger is the power of compounding.
- Do make as many solid investments as you can. If your goal is to cater to short-term goals, consider debt funds. If you wish to grow your capital and create wealth in the long-term, equity mutual funds might be the best bet for you. Additionally, if you wish to save tax while generating capital, you might consider investing in tax-saving ELSS funds, also known as ELSS (Equity-Linked Savings Scheme).
- Do not lavishly spend your money without thinking about the consequences. A little fun is always desirable. But make sure that you do not splurge your entire inheritance.
- Do not quit your job or leave your business. You might get tempted to do so thanks to the significant amount received from inheritance. Quitting or early retirement will only lead to a huge hole in your inheritance money at a much quicker pace.’
- Do not act rashly. You might have sudden impulses to make a big-ticket purchase. However, do not give in to your cravings. Act responsibly and invest your money in the apt investment options.
You can also use a lumpsum calculator to understand the future value of your lumpsum mutual fund. A mutual fund lumpsum calculator will help an investor to plan their finances in a better way. Happy investing!