Candice Stanley, Financial Advisor

written by:

Candice Stanley
Financial Advisor

We meet with clients of all levels of wealth...

and regularly with clients who have received a windfall such as an inheritance. Very often beneficiaries aren’t sure how to manage a newly introduced lump sum of money and so they come to us for advice.

The first thing we advise beneficiaries to do is wait. That’s going to be the hardest advice to heed because it takes some discipline. It’s especially hard when you have a laundry list of home repairs, credit card debt or a vacation you’ve been dreaming of for years. This cooling off period is necessary however because very often you’ll find that your short-term expenses aren’t as important as your long-term aspirations. Time will help you sort them out. While you wait, construct a plan in order to eliminate making emotional financial decisions. Often, you’ll find that working through a plan will lead to more logical decisions instead.

During the planning process, create a list of goals. These goals not only have to be financial but they can be personal goals as well. What are your life long dreams? What do you want to accomplish in the various stages of your life? Ask yourself how this windfall can fit into your plan and help you attain your goals. Your dreams may start to look like reality.

Next prioritize what you’re going to tackle first. This might be where some of us get hung up. There are all these ideas and wants in life but how to address them is important in order to make them happen. Here’s what we suggest:

  1. Establish an emergency fund of 3-6 months of living expenses. This will help to stay out of debt because the next time an auto repair situation arises you don’t have to break out the credit card.
  2. Pay down debt, especially student loans and credit card debt. If you have an auto loan, tackle that next. Paying of mortgages may depend on your life stage. If you are young and have stable employment, you possibly should invest some of your dollars instead. If you are nearing retirement, pay off the mortgage.
  3. Maximize your retirement savings such as in a Roth IRA or in your 401(k) contributions at work. Do this every year if possible.
  4. Have fun! After you have successfully executed a financial plan then reward yourself. Take that dream vacation but limit a percentage of your inheritance towards discretionary spending to no more than 10%.

Receiving an inheritance can be bittersweet. It means you’ve lost a loved one and are now receiving a final gift from them. Seek help from a financial advisor when making financial decisions. We can help you with a plan, take the emotion out of decisions and ultimately relieve a burden while you grieve. It’s one less thing off your plate during a difficult time and can greatly benefit your future for years to come.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.