3 Ways to Make Better Use of Your Windfall

Texas Tech personal finance professor, Michael Finke, claimed that when an inheritance is less than $10,000 people treat the windfall as “spending money.” Interest.com’s survey revealed that people that spend their inheritance tend to spend it on buying a larger home, purchasing jewelry, or on a new car.

Pennsylvania certified financial planner, Erin Baehr, explains that her clients usually claim that an inheritance will serve as funds to pay for the mortgage, retirement, and their kid’s college tuition.

The advice of many financial planners is to spend a windfall to establish financial security. Below are the three phases that help accomplish this goal:

1. Set aside between 6-12 months wages for unexpected expenses and emergencies.
2. Once the rainy day fund is established pay on outstanding balances with high interest rates.
3. After phase one and two are established, put the additional cash into an investment portfolio.

See Rich Smith, 3 Smart Ways to Spend Your Inheritance, Daily Finance, Oct. 2, 2013.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.