Avoid These Inheritance Blunders

Receiving an inheritance can be a great financial opportunity; however, if you are not careful, it can easily be wasted.  Unfortunately, heirs often end up spending all of the money and become accustomed to a more lavish lifestyle than they are able to maintain.  Figuring out what to do with an inheritance without squandering it can be difficult, but it is crucial to have a plan in place.  Provided below are common mistakes to avoid:

1. Spend without assessing.  It is important to take an honest look at your financial situation.  Acting without knowing where you stand can lead to trouble.  First tackle any debt you may haven, then focus on life improvements. 
2. Ignore expert advice.  Even if you are financially responsible, you can still benefit from the advice of an attorney or other financial expert once you receive an inheritance. 
3. Being unrealistic.  Try to avoid “lifestyle inflation”—the large influx of cash may not last as long as you think.  Adjust expectations and figure out how every purchase will affect your future.
4. Relinquishing other income sources.  Unless your relatives are exceedingly wealthy, it is not smart to leave your job just because you received an inheritance.
5. Paying for friendship.  Although sharing is a nice gesture, giving all your inheritance can end up hurting you.  Establish boundaries with families and friends so they do not end up asking for their “fair” share. 

See A.J. Smith, 5 Things Not to Do If You Inherit Money, Credit.com, Jan. 7, 2014.