If you’ve received money in a will from a relative or close friend, it can be difficult to have a clear idea of what to do with it. Of course your personal circumstances and the amount that you receive will play a big role in your decision, but whatever the case, these are four things you should always consider.
1. Be patient with it
Whatever you do, don’t rush into making a decision. Receiving a windfall is always a blessing but in the case of inheritance, it can be extremely bittersweet. When receiving inheritance due to the loss of a loved one, it’s totally understandable for your emotions and grief to cloud your judgement, so be patient. Take your time. Under the Financial Services Compensation Scheme an inheritance balance of up to £1 million in a bank account is protected for 6 months, so you don’t have to do anything with it straight away.
2. Don’t be afraid to ask for help
It’s always a good idea to get some advice when you receive any unexpected money. Contacting your Brunsdon Financial Adviser at this time may be just what you need to help develop the clarity of how best to use your inheritance. We can look at your personal situation and circumstances and help you make the best decision for you.
3. Clear your debts
A great place to start is by considering any money you owe, and whether your inheritance can help you pay off any credit cards or personal loans. You’re best off prioritising debts of the smallest value and debts which are costing you the most interest. For example, a loan or credit card balance with a high interest rate can feel like a burden, which is maybe a good reason why it should be the first to go. Once cleared, it saves you paying back more than you owe in interest and increases your disposable income.
4. Savings, investments and paying it forward
After paying off any debts, aim to put away enough money for an emergency fund to cover three to six months of your normal outgoings.
At this point, there are countless routes to go down with your remaining windfall, so again, we recommend you speak to your Brunsdon Financial Adviser who will be able to offer advice based around your personal circumstances. One option to consider is bolstering your savings. A good mix of easy-access and fixed-rate savings of between one and five years is generally a good idea, but again the options will depend on the amount involved and factors such as your attitude to investment risk. Diversifying your investments and investing over long time periods can minimise the risk, providing you with some level of protection.
Alternatively perhaps you see your inheritance as an opportunity to pay it forward and lend a hand to your own relatives and loved ones. If you don’t need the money and would rather somebody close to you received it, a deed of variation can be written up to redirect the gift. Whatever you decide to do, please talk to your Brunsdon Financial Adviser before making a decision.