TRANSCRIPT:
If you were recently a beneficiary of a family member who passed away, you may have come into some money through an inheritance. First off, my condolences. But in this video, I’m going to give you some recommendations on the best things you can do with that money. I’m Alex Wolfe, a certified financial planner and head of financial planning at Base Wealth Management.
An inheritance can be a great way to put yourself in a better position financially, or a great way to fund something that you’ve always wanted to save for. Think about your financial goals. Is there something that you’ve been saving up for, or maybe something you put off saving for? One example could be saving for your children’s education, a higher degree, or a certification for a trade career. And maybe it’s not even your child, but maybe for yourself to further your career or switch industries.
Many of my clients find that they were too busy raising their kids or had to allocate their finances elsewhere and were not able to start saving for their kids’ education or certifications. Some clients even said that that was not something that they were planning to do for their kids. This new inheritance may change your mind or allow you to start funding a 529 or custodial account.
The great thing about 529 accounts is that they now allow you to use that money for so much more than they used to. I won’t get into all that in this video, as that’s a whole separate topic.
What else is a good idea to do with your inheritance? Paying off debt. Like many of us, you may have credit card debt, student loans, a line of credit, or a car loan. You want to start with the highest interest rate debt that you have and pay that off first, and then work your way down. An inheritance or an unexpected sum of money is a great way to put this to work for you, compared to spending it on something frivolous like a gift for yourself. And I know this is hard, and you may want to treat yourself. I struggle with this as well. But a good use of discipline to try to use this money to pay off high-interest debt or loans could be a good option.
If you still have some money left over after paying down your debt, you should put some of that into savings or even invest it. It is always a good idea to have that rainy day emergency fund. But once you have that covered, you can invest the excess into either an IRA or Roth IRA or even a brokerage account. In another video, I talk about the top five things that the best investors do to get ahead, and this is one of my points: The Millionaire Next Door is slowly putting money away and investing it into the stock market and letting those returns grow.
For many, this can seem scary, or maybe you just don’t have that extra money to invest. You want to try to start with even a small sum of savings, say $50 or $100 a month, and put that into the stock market, and you’ll be amazed at the growth in 10 or even 20 years. However, if your inheritance is even larger, you may be able to put much more than that into the stock market, and you may want to find some tax-efficient ways to invest.
Lastly, consult with a professional. You can reach out to us at Base Wealth Management, and we can help you with a plan of action for your inheritance. There are many things to consider when receiving an inheritance, as sometimes it is cash, and other times, it may be physical assets like a home, cars, or even a coin or gold collection.
If you found this video helpful, please like and subscribe for more content with financial tips and tracks. I’m Alex Wolfe, head of financial planning at Base Wealth Management. Be sure to check out our latest videos, podcasts, and much more on our website at BaseWealthManagement.com. We’ll see you on the next one.
