Yesterday we talked about all the different ways not to use your inheritance, and there were some great tips in that post. So what’s left for you to do with it after you’ve read what not to do with it? Here are a few very wise ways to use that inheritance.
Pay off your debt
The chances are that, until you’ve received that inheritance, the number one reason you haven’t paid off your debt yet is being you continue to say that you can’t afford it. That may have been true at the time, but now you can, so it’s important that you pay off the debt while you can. So drag out all those credit card statements, your past taxes that are still due, and even your mortgage. Now is the time to pay off that debt and yes, if you can take the chance to pay off a huge chunk of your mortgage (or even all of it!) you should definitely take it. If you have debt, this needs to be done before anything else.
Create an emergency fund
Again, lots of people don’t have an emergency fund because they’re already living pay cheque to pay cheque and there’s simply no extra cash to put aside and not touch. But having an emergency fund does more than just give you money when you need it the most, it also gives you peace of mind – whether you need the money or not! Too many people live through sleepless nights worrying about “what if” and that dreaded “one day” that something major will come up and they won’t be able to handle it. Put away what you need to live for six months; and aside from the amount of money, it’s also important to think about where you put the money. Put the emergency fund cash in a high-interest savings account, but one that allows you to pull out the cash easily when you need it.
Create an education account for your kids
If you have kids and you don’t already have an education account set up for them, the chances are that this is another financial item on your “to-do”list that you’ve been wanting to do. Set up an RESP and start it off with a chunk of the inheritance money. You’ll feel better, and your kids will thank you when they’re looking at big tuition fees that have already been taken care of for them.
Set aside someone else’s inheritance
Also if you have children, the chances are that at some point you’ve already worried about the funds – or the lack thereof – that you want to leave for them. If you already have an inheritance set aside for them, boost it with a bit of the inheritance you just received. And if you don’t, now’s the time to start building an inheritance so you can leave them something. Just make sure that you’ve taken care of the above tips first, as it makes no sense to put money aside for the future if you haven’t taken care of today first.
So for the past two days we’ve talked about tips with what to do with your inheritance should you be lucky enough to receive one. But what if you want to leave someone an inheritance? Tomorrow we’ll give you tips when you’re in that fortunate position.