By Harris Financial Advisors

Receiving an inheritance can come with conflicting emotions: you might be in mourning after losing your loved one, feeling overwhelmed from your sudden windfall of wealth, or worried that you might spend the money too fast or put it in the wrong places.

All of these feelings all valid. The National Endowment for Financial Education found that an estimated 70 percent of people go through their newfound wealth in just a few years. Another study found that adults who receive an inheritance save just half; they spend, donate, or lose the rest. And nearly 20 percent of baby boomers who received $100,000 or more spend their entire gift, according to that same study.

It can be difficult figuring out how to handle an unexpected financial windfall. That’s why it’s important to not make decisions right away. After taking time to process, you’ll want to find out what you are inheriting.

Types of Inheritances

Your inheritance might include cash, houses or other property, a trust account, or a retirement account. You’ll want to assemble your team of professionals — such as a financial adviser, accountant, and lawyer — to decide on the best next steps for each type of inheritance. For instance, if you inherit property, do you want to sell it, rent it out, or move into the house? You’ll want to become informed about all types of inheritance and consult with your financial advisor.

Best Practices for Handling an Inheritance

Here are some steps to take when dealing with an inheritance.

  • Create an emergency fund. You should save enough money to cover 12 months.
  • Pay off high-interest debt. Eliminate any high-interest debt you have, such as credit card debt or personal loans.
  • Put money into an insured account. Until you have your financial plan figured out, put cash and life insurance proceeds in a federally insured bank account.
  • Save for retirement. Put your inheritance toward your retirement so you’re on track to retire on your own terms.
  • Make investing a priority. Your money will grow over the years. Make sure to also diversify your investments.
  • Give back to causes and charities you care about. Define your philanthropy goals. This could also be a way to honor your loved one’s legacy.
  • Define your long-term goals. This could include saving for vacation, buying a new home or car, saving for your child’s college fund, or starting a new business.
  • Learn to say no. It can be difficult turning down financial requests from friends or extended family members. Consider writing a letter to family and friends explaining you need time to figure out how to handle your inheritance and stick to your policy.

Contact Harris Financial Advisors to Develop Your Financial Plan

When you suddenly have a large influx of funds, it’s easy to make mistakes. It’s important to consult with a financial advisor so you have the best financial plan in place for your inheritance. Contact Harris Financial Advisors today for trusted financial guidance and expertise.