This is actually a pretty common question. With many baby boomers aging and leaving their assets to their kids many children suddenly find themselves with quite a bit of money willed to them from their parents. We are in the midst of one of the largest asset transfers in history as baby boomers grow older and do not spend their savings before passing. The heirs are then faced with the question of What should I do with my inheritance? For many, the answer seems obvious. Pay off bills, go on a trip or update the house etc. In other words, spend the money!
Having been the recipient of an inheritance several times, the writer can write from personal experience. The first time my wife and I inherited just enough money to by a car. We really needed a car. Our existing car was on its last legs and we decided to spend our money this way. We got a great car and it lasted for many years, but at the end of its life we had nothing from the inheritance and had to by another car. We spent the money on something that depreciates over time and also was worthless at the end of its life. What did we have to show for it? Nothing!
What should I do with my Inheritance – the Next Time?
We learned a tough lesson in the sense that we really had nothing to show from the inheritance. Don’t get me wrong, it was a nice gift and at least we did not blow it on a trip that lasted two weeks or partied. We could have done that and had distant memories of how we spent the money.
Based on this experience, we decided the next time we received an inheritance we would invest the money into the stock market and take the income generated from the stocks in terms of dividends. We had a variety of bills at the time and we also had a mortgage which we could have paid off, but we learned a lesson that it is very easy to spend the money and very difficult to save it.
We invested in blue chip stocks that pay dividends every quarter. They also had a long history of paying these dividends and raising the dividends as well. In other words, we not only received a regular income, we also got a raise every year. We could have reinvested the dividends, but choose to take this income and enjoy this money.
There have been many ups and downs in the markets over the years. At one point we even had less money than what we started with. We did not sell or change our investments. Over the years the market not only recovered it has topped new levels. The end result is that we now have quite a bit more money than what we started with and we have received income every year for the past 18 years.
For us this was a really great success story and was our answer to the question, what should I do with my inheritance. Everyone makes decisions based on their own situation, but just remember once it is gone, it is extremely difficult to save enough money for later in life.
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