This week’s theme is: What Do I Do With Inheritance Money?
Today, I’m talking about how to waste your inheritance. Yesterday, I talked about how 20% of Americans who receive an inheritance will end up spending it all. And a great many of those I imagine will be worse off financially because they got themselves into houses they couldn’t afford and lifestyle changes they couldn’t sustain, and as a result, end up losing more than what they gained in the inheritance.
Studies show that most of us only end up saving and investing about ½ of our inheritance.
So with these dismal stats in mind, let me share with you some reliable ways to waste your inheritance:
- Sacrificing your retirement and long-term financial security for short-term pleasures. If you receive an inheritance in your 50s and 60s like many Americans do, that could be the key to financial security in retirement, and make up for a lack of savings on your part. However, it’s very tempting to spend your inheritance on luxury vacations or a beach house, and you miss out on the opportunity to make the money last and continue to provide for your needs years into the future.
- Spending without a plan in place. I’ll actually talk more about this in a couple days when I’ll be asking you what you would do with a $1,000,000 windfall today. But a big mistake that people make when they receive an inheritance is that they just start spending. They think that a little here and and little there won’t add up, but it does. Having a plan and earmarking specific funds for specific purposes is key to not wasting an inheritance and then wondering where it all went
- Listening to the advice of friends and family, or worse, no one at all. People who know that you received an inheritance may be eager to help you spend your inheritance or try to get you to invest in something that isn’t prudent. And many people who aren’t used to managing their money won’t know what to do with a large sum all at once. But objective and unbiased advice is key. Don’t take investment advice from your hunting buddy or your brother-in-law. Instead, seek out the council of a competent tax advisor and a financial advisor who will put your needs first and help you make a plan for the long-term so you don’t squander your inheritance.
That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip.
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