Money hacks: What to do if you inherit a lump sum

A well-thought-out plan is essential to manage your new finances wisely.

Receiving a lump sum inheritance can be both exciting and overwhelming. While it’s tempting to indulge in immediate spending, it’s important to approach the situation with a clear mind and a well-thought-out plan. In this article, we will explore effective ways to make the most of your inheritance, including managing your finances wisely, investing for the future, and finding a balance between frugality and enjoying life.

  1. Take a breather: The sudden influx of money can leave you feeling disoriented. It’s essential to resist the urge to splurge right away. Take a breather to process the situation and adjust to your new financial reality. Give yourself time to reflect on your goals, aspirations, and responsibilities before making any major decisions.
  2. Assess your financial situation: Before diving into any new ventures, evaluate your existing financial position. Determine if you have an emergency fund in place and whether it needs enhancement. Consider setting aside a portion of your inheritance to bolster your emergency fund, ensuring that you have a safety net for unexpected expenses or financial downturns.
  3. Explore investment opportunities: Inheriting a lump sum presents an excellent opportunity to grow your wealth. Consider consulting with a financial advisor or doing thorough research to identify suitable investment options. Whether it’s stocks, real estate, or starting your own business, strategic investments can help you secure your financial future and provide long-term returns.
  4. Pursue passion projects: If you have been contemplating personal or business projects but lacked the necessary funds, your inheritance can be a game-changer. Allocate a portion of your inheritance to pursue these endeavours, whether it’s starting a new business, furthering your education, or turning a hobby into a profitable venture. Follow your passions while leveraging the financial freedom your inheritance has provided.
  5. Find balance and enjoyment: While it’s crucial to manage your inheritance responsibly, remember to allocate a percentage of it towards your own happiness. Strike a balance between frugality and enjoying the fruits of your labour. Treat yourself to experiences, travel, or other meaningful pursuits that bring you joy and fulfilment. Life is meant to be lived, and living with regrets is not a wise approach.

Inheriting a lump sum can be a life-changing event. By approaching it with careful consideration and planning, you can make the most of this financial windfall. Remember to pause, assess your financial situation, and prioritize your goals. Invest wisely, pursue your passions, and find a healthy balance between saving for the future and enjoying the present. With a strategic approach, your inheritance can lead to long-term financial stability and personal fulfilment.

Luca Caruana is the founder of the Money Coaching Hub. Follow his weekly column here and his LinkedIn account or his Instagram for more budgeting hacks. For other money-related columns, check out Luca’s tips for children’s pocket money, and his tips on how to actually build an emergency fund.

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