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November 07 newsletterWhat to do with that inheritance?
For most people, receiving an inheritance or winning a major prize is a once in a lifetime event. It is their one opportunity to really engineer some financial security into their lives.
Suddenly coming into a large amount of money can be daunting, and an event you are generally unprepared for. The following steps will provide you with some guidance in the event that Lady Luck smiles on you.
Lock the money away
Of course, you should keep some play money aside, but if you have the propensity to spend, put the money away in a term deposit for six months. This will give you time to settle your nerves and ensure that you donít wake one morning to find that it has all been spent (ďit was a great time, but I wish I something to show for itĒ).
Make a plan
Itís a good idea for the family to sit down and plan how they want to spend the money. The fun of buying a lotto ticket is imagining what we will do with the winnings, but no one actually sits down and writes a plan. So, if you havenít sat down as a family and planned your financial goals, this will be the time to do so.
Pay off debt
The first course of action is to repay any outstanding debt. This represents an effective risk-free pre-tax investment return of approximately 13%. In addition, the financial burden of being beholden to a bank or other lender is removed and, if interest rates suddenly sky rocket, your new investments will earn a higher interest rate.
Pay for good advice
It is always a sound investment to pay for good specialist advice, and if you have a lump sum investment then that is as good a time as any. Please refer to our topic ďBefore you InvestĒ for more guidance. If you have money on term deposit, the bank (if they are doing their job) will contact you and pitch for the investment money. Like all advisers, they range from bad to great, so donít commit to them, but put them on your list of prospective advisers.
Spend some money
If you get to this step, and you already havenít treated yourself, why not splurge on that luxury item youíve always wanted?
Random page of the month
Letís face it, there is no inheritance coming this way so why not check out the secrets to wealth?