Prioritize Financial Security
Using your inheritance for frivolous items or expensive trips can be tempting. And while it’s important to leave room to treat yourself, putting your financial security ahead of short-term thrills is a more sustainable way to support your financial health.
Pay Off Debt
Using an inheritance to pay off debt can help ease the financial burden (and your stress levels) so you can move forward unencumbered. Start with debt that incurs the highest interest, like credit card debt. Also, look at paying down your mortgage—the less you owe, the lighter your monthly expenses and the more you’ll earn from any potential sale later. Experts recommend that higher earners aim to save closer to 15%, whereas lower earners can stick closer to 10%.
Establish an Emergency Fund
Protect yourself and your family from unexpected financial hardship by contributing some of your inheritance to an emergency fund. Put at least three to six months’ worth6 away to cover unforeseen events like job loss or sudden medical bills.
Create a College Fund
Student loan debt has doubled since 2010.7 An inheritance can help support you or your children through their higher education without the burden of debt later in life.
Open an HSA (or Maximize Your Contribution)
Putting some of your inheritance towards a health savings account can ensure that you have ample funds to cover medical expenses. The current plan8 year allows contributions up to $3,650 for self-coverage and $7,300 for family coverage. One of the benefits of an HSA is that any unused funds continue to roll over each year, so you never lose the money you didn’t spend.