Sometimes the sad news of a loved one passing comes with some unexpected news – the deceased may have left you some money. Receiving an inheritance is a sign of your esteem in their eyes. While it may be tempting to spend it, using the money wisely is often the best way to honor your lost relative or friend.
Spending your unexpected gift lavishly is almost always a bad idea. Unless you have more cash stashed away, it could lead to all kinds of financial woes down the road. Here are a few things you can do to make your money go further:
Get back in the black
While interest rates have fallen to record lows, the rates on outstanding credit card balances have not fallen in lockstep. Many continue to be high. Using your newfound money to pay off a credit card could be one of the smartest moves you make.
Is your house in order?
Think about putting some of that money towards your current mortgage. If you settle enough of it, you might be able to take advantage of some of the lowest mortgage rates on record by refinancing. It’s really the best of both worlds — you get to put the money toward your home’s equity, and it gives back to you with interest savings.
This goes without saying, really. There are many investment vehicles that can provide opportunities for your money to grow, depending on your comfort with risk. Plus, it gives you the opportunity to rebalance your portfolio when you’re buying rather than selling.
Add to your retirement nest egg
If you haven’t reached the contribution limits on your IRA, putting money toward your retirement can be a really smart move. You’ll defer taxes on your contributions, build up your savings and potentially compound them with future earnings.
Send your kids to college
College fees are now more than most people can comfortably afford. If college is in your future - whether it’s for you, your spouse or your kids - then contributing to something like a 529 plan can be a great move. Saving for college in advance can make the expenses much more manageable.
Find your inner entrepreneur
More than half of all Americans have thought about starting their own business. If you’re one of them and you’re already financially secure, using your windfall to fund your business dreams can be a great idea. But be aware of the risks: according to Bloomberg, 80% percent of businesses fail within 18 months.
A little indulgence is actually important now and then. So budget a part of your money, go out, and spend it. Then, take the rest and put it to work for you – financial professional can help you figure out how.
This material is provided for general and educational purposes only; it is not intended to provide legal, tax or investment advice. All investments are subject to risk. We recommend that you consult an independent legal or financial advisor for specific advice about your individual situation.
The tax information herein is not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding tax penalties. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor.
Securities and investment advisory services offered through Voya Financial Advisors, Inc., member SIPC.
Neither Voya nor its affiliated companies provide tax or legal advice. Please consult with your tax and legal advisors regarding your individual situation.