Have you recently inherited a large sum of money and need to know the first steps to ensure you don’t blow it? Then, we got you covered. After someone asked for Redditor’s best tips, these are the top-voted responses.
1. Hold Your Cards Close to the Chest
Someone recalled a few friends who won a settlement equalling $300 thousand each and how it affected the relationships around them when their close friends found out. They explained the number of people who felt entitled to the settlement was hard to watch.
2. Do Not Live Above Your Means
Someone noted not to trick yourself into thinking you can purchase whatever you want because you have lots of money left. The truth is you will end up broke in a year. For example, the following person replied they inherited $50 thousand and did not have anything to show for it less than two years later.
3. Educate Yourself on Laws Around Inheritance
One mentioned the laws around inheritance and the needing to educate yourself on them, especially if you are in a relationship. They continued how a spouse or common-law partner may feel entitled to their significant other’s newly acquired gains.
Another person suggested a consultation with an inheritance or family law lawyer. Even if you don’t follow through on their advice, it is helpful to get professional advice.
4. Put Your Oxygen Mask on First
One user commended the original poster (OP) for wanting to help a friend in need while warning the same person not to allow themselves to be taken advantage of with their lump sum. They compared it to putting your oxygen mask on first in the event of a plane crash because you can’t help anyone until you take care of yourself first.
5. Guaranteed Investment Certificates (GIC)
Another mentioned the use of a Guaranteed Investment Certificate. They elaborated on saving what you will need to survive for a year and put the rest into GIC a year to research the best financial decision. Someone else made a note to beware of emotional or impulsive purchases.
6. Banks Look Out for Themselves
One said to please refrain from talking to your bank because they are salesmen, not advisors, and they have a massive conflict of interest. They continued how the bank will recommend what is best for themselves and their commission first, then you second.
7. Talk to a Fee-Based Advisor
They continued to be sure to speak with a fee-based advisor instead of talking to a bank advisor. The fee-based advisor will analyze your entire financial picture.
One confident individual declared it’s the best way to establish a well-laid financial plan. Another individual agreed with the idea of talking to a fee-based advisor because they won’t suggest you invest in high-priced products that will hurt your return on investment.
8. Purchase a Reliable Shelter for Yourself
Another suggested purchasing a home or apartment with low taxes or condo fees. They continued that buying a stable shelter eliminates one of the most significant expenses in most people’s lives. Having low to no-cost shelter also alleviates the stress of finding a job that allows you to afford your lifestyle and maintain a roof over your head.
9. Invest in Furthering Your Education
Many believe investing some of your gains to further your education is a great idea. They suggested shooting for an occupation with an annual salary between $80 to $120 thousand and a lovely pension. Someone else shared their love for the idea of being able to go back to school without any worries about financial stability.
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10. Get a Whole Life Insurance Policy
Finally, someone suggested considering a whole-life participating insurance policy. The user hinted toward the concept of infinite banking as the reason behind it. However, they continued with a warning to do research before investing in anything and not to waste money on a term policy when you can acquire a whole life policy instead.
What do you think? Did Reddit get this right, or is something significant missing from this list? This article is inspired by the internet and does not necessarily reflect the views or opinions of The Cents of Money.
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With a passion for investing and personal finance, I began The Cents of Money to help and teach others. My experience as an equity analyst, professor, and mom provide me with unique insights about money and wealth creation and a desire to share with you.