When you get an inheritance, your first question may be, “What should I do now?” But a better question is “What shouldn’t I do now?”
Getting an inheritance arouses many emotions. Sometimes, people get too excited and they spend all the money without thinking about the best uses for it. Others feel uncertain that they know how to manage the wealth they just received. Their fear paralyzes them, preventing them from making good investment decisions.
What are the mistakes to avoid?
When you get an inheritance, don’t let the tangle of emotions interfere with making good choices. Avoid the following:
Impulse spending. While you may have always wanted a luxury car, designer jewelry, or the latest tech gadget, step back and ask yourself if these are really the best uses for your new wealth. Sometimes there is an additional cost to an item beyond its price tag – can you afford the ongoing costs of maintaining a new acquisition?
Get-rich-quick schemes. While it may be prudent to invest some or all of your inheritance, don’t get blinded by your desire to make as much money as possible. Many offers of “high returns” that sound too good to be true often are. Sometimes preservation of wealth is more important than growth. Consult your financial professional before making any investment decision, since their objectivity and knowledge can alert you to scams and unrealistic expectations.
Fear and anxiety. Don’t be too frightened to take some risks. The problem with conservative investments is that low-interest rates may not beat inflation, so in the long run, your money may lose its real value. A financial professional can help you assess your situation and suggest suitable investments.
Greedy/Needy friends or relatives. If you are approached by gift/loan requests, don’t feel pressured into agreeing. First make sure that your own future is financially secure, and only then weigh the merits of the request.
What should you do now?
There are positive ways to use your inheritance. For some more information on what to do after you receive an inheritance, join our free webinar. Register at Profile-Financial.com/webinars
Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published May 1, 2017. Updated January 2021