An inheritance is one of the largest financial windfalls most people will ever receive. When one comes around, it’s important to use it properly for your own future financial betterment. Here are four things you can do with your inheritance to set yourself up for a lifetime of financial success.
If you’re currently in debt, one of the wisest uses for your inheritance is to pay your creditors off and become debt free. Eliminating monthly payments will free up your own income for saving and investing. Paying your debts off early will also save you money in the long run by allowing you to skip interest payments you otherwise would have made.
Placing the sum of your inheritance into a broad index fund and allowing it to grow until you retire while continuing to invest your own money is one of the best ways to ensure you have a comfortable retirement. Index funds have a history of providing stable, consistent growth. Allowing your inheritance money to simply grow is a great strategy for achieving wealth later in life, especially if you receive an inheritance while you’re still relatively young. Be sure to consult a qualified investment advisor when choosing the fund or funds that are right for you.
Home ownership is a critical component of achieving financial independence. Using your inheritance to put a large down payment on a home is a good way to buy a valuable asset that will help you build your wealth in the years to come. If your inheritance is large enough, you could even consider buying a home with cash and skipping the mortgage process altogether.
If you already own your primary residence, you could also use your inheritance to buy a rental property. Becoming a landlord will provide you with a fairly reliable stream of monthly income and also allow you to build equity value in your rental property. As with buying a primary home, you can either use your inheritance as a substantial down payment or to buy your rental property outright.
Doing one or more of these things with your inheritance can substantially improve your own financial life. Paying down debts should be your first priority, but it may also be a good idea to split your inheritance between these goals to make progress in several areas at once.