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10 Tips for Investing Your Inheritance

Worried about losing more than just a family member? These tips for investing your inheritance will help keep you safe.

By Skunk UzekiPublished 6 years ago 6 min read

You're grieving. You never thought you'd see the day that loved one passed away. It's rough on so many levels, too. You had to plan a funeral, divide up possessions, and also still bust your back at work. It's hard to function—but there's some mildly good news.

If you're like a lucky few, you may have an inheritance written in their will to enjoy. Though it may be stressful to think about, you should figure out what to do with your inheritance.

Most financial experts suggest investing it, and those who get an inheritance would be wise to consider following their advice. Here are some of the best tips for investing your inheritance, as suggested by the pros.

Put wild spending sprees on pause—at least for the first three months.

One of the worst things you can do when you find out you have an inheritance is to mindlessly spend it all. Sadly, that's how a lot of fools end up wasting their loved ones' money once they get it.

That might be a sizable chunk of cash, but wait a while before you do anything with it. Come up with a financial plan first, and then put it into action.

By coming up with an investing plan, or at least a good idea of what you have to do in order to get yourself into good financial health. Then, order your financial goals that way.

Understand that you do not have to pay off the deceased's debts.

One of the best tips for investing your inheritance involves maximizing its preservation. There's a very good chance that your relative had debt, and if they did, you will start getting calls from collections agencies. The person who owes that money no longer is alive.

Unless you have been one of the people who signed off on that debt or were married to the person, you have every right to tell them to stop calling you. They no longer have a right to the money, as the person there has died.

Most collections agencies will try, and others will be fooled. If they continue to harass you, you can report them and actually get money paid to you. You were gifted that money, so don't let people try to seize it from you.

Collecting money from dead people may seem legal, but come on. It's just adding more tax on an already-rough time.

Most advisors suggest paying off debt first.

If you take a look at most sites offering tips for investing your inheritance, you'll notice that a lot of them talk about paying down debt. They are absolutely right to suggest this, too.

Most people are stuck in a cycle of debt and won't be able to get out. Interest rates on debt can be sky-high, which makes it very likely that the debt will eat away at anything that you do.

The numbers alone will tell you volumes about why paying off debt is the best investment you can make. You could easily save thousands of dollars a year by just using your inheritance to get rid of those recurring bills.

One of the smartest tips for investing an inheritance is to fund an emergency account. Emergencies happen, and when they do, you'll want to have an account that allows you to escape the financial hit without having to go into debt.

Want to make it a bit more techy? Use a program like Qapital that allows you to monitor activity, access your account when you need money, and even gives you a debit card that you can use if need be.

This may not seem like an investment per se, but it is. It's investing in your financial security and also investing in your future.

If you're young, you may want to contribute it to your retirement fund.

The younger you are, the wiser tips for investing an inheritance into your retirement are. If you are in your 20s and invest $10,000 into an IRA account, it could grow to over $100,000 by the time you are in your 60s. That's an epic return on investment, and also happens to be safe from taxation.

Before you start thinking about investing your inheritance in stocks, take a pause. This is a risky investment vehicle, particularly if you don't do much due diligence and don't diversify your stocks. If you're totally lost when it comes to the stock market, your best option is to go for quality ETFs (like the ones on Stash), one of the best mutual funds, or just plunk your money into one of the top S&P 500 index funds on the market.

All of these funds are made from a wide range of stocks that are handpicked by professionals in the finance field. Index funds, in particular, are good investments for people who want to make sure that their investments match inflation and keep up with the stock market.

Though a lot of alternative investments to the stock market may promise good returns, it's often best to stick with low-risk investments for your inheritance.

If you inherited a very large sum of money, you might want to hire a tax specialist.

Estate taxes and other similar fees can make your tax returns look less than welcoming. The larger your inheritance, the wiser it might be to start looking for a tax specialist to help you figure out how to manage the money or pay off the taxes.

If you're lucky, you might get a specialist who also doubles as a financial advisor with a wealth management company. They may be able to offer tips for investing your inheritance that would be more specific to your needs.

Another good option to consider is using the inheritance for fixed income investments.

There are a lot of ways to invest money which will result in fixed, steady, guaranteed income. Investing in a series of vending machines, making a CD ladder, or even investing in a rental property can all give you a steady amount of money.

The key thing to remember is that you should seek out relatively passive income when looking for investments. An ideal investment should have your money working for you, and would require minimal work on your end to keep up.

Oh, and before you start investing an inheritance, you should figure out what you inherited first.

You can inherit tons of different things—and what you inherit will change what you can do with it. Your options can change drastically depending on what you inherit, as will the methods that you can turn that inheritance into cash.

For example, if you inherited real estate, you need to figure out whether you want to keep or sell the house. If you sell the house, you might have to pay more taxes.

If you inherited an IRA or retirement account, whether or not you were married to the deceased will matter, and there's a chance that you might only be able to roll it over into your own retirement account.

Before you try anything, learn the laws and talk to someone who understands finance. They will be able to guide you on the best route.

Finally, remember that you probably shouldn't be investing your inheritance in relatives or "long lost" friends.

With just about any kind of windfall, you'll notice people coming out of the woodwork asking for cash. This, for some reason, is doubly true with inheritance money that's given as a lump sum.

Though they may tug on your heartstrings or straight up throw a tantrum when you refuse, trust us when we say that the deceased wanted you to have that inheritance for a reason.

If necessary, ghost them or cut them out of your life. There's no reason why you should cave into people who are only being nice to you because you have cash. If "long lost" friends start knocking, tell them to stay lost.

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About the Creator

Skunk Uzeki

Skunk Uzeki is an androgynous pothead and a hard partier. When they aren't drinking and causing trouble, they're writing articles about the fun times they have.

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    Skunk UzekiWritten by Skunk Uzeki

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