Tips for managing an inheritance

Channel Head at FNB Financial Advisory, Ester Ochse

Channel Head at FNB Financial Advisory, Ester Ochse

An inheritance can be a great financial bonus; but if not managed correctly will also pose a few challenges. Receiving a windfall is great and the urge to just spend it quickly is quite tempting.

“Resist the urge to use the money, let it sink in first and put the money in a short-term bank deposit while working out what you want to do with it. Don’t tell anyone about your windfall. It’s amazing how people suddenly want to be part of your best friend circle once they find out about your inheritance,” says Ester Ochse, FNB Financial Advisory Product Specialist.

She suggests the following tips to managing your inheritance:

  • Say no to impulse purchases: Rather wait to get a full financial plan from a financial adviser which will help you ascertain where your money should be invested.
  • Understand the implications of your inheritance: This is a once in a lifetime opportunity that will put you on the path of wealth creation. Research and understanding on how and when to use your inheritance is an important initial step in this process.
  • Do not resign from your job: Money does not last forever. For example; If you draw an income of R30 000 per month from R2 500 000.00 – you could run out of money in 10 years which is not ideal and a good place to be in. The golden rule is to stay in your job. This will help ensure you are financially secure in the long-term.
  • Have a personal finance day: Conduct a dipstick and determine what your priorities are, and ask yourself the following questions: What is your financial position and do you have debt; both short term and long term?
  • Make a list of who you owe and what the rate of interest is. If you have short term debt, like store cards, pay these off first especially the high interest amounts. Then put these funds away for three months’ worth of expenses.
  • Portion the funds: Part of your funds can go to retirement funding, education and then to true wealth creation.
  • Diversify, diversify, and diversify: It is important that you diversify; which will help you get exposure to all sorts of asset classes and will ensure that your goals are met over the long term. This will happen by including growth assets like shares and property.
  • Enlist the help of a financial advisor: A qualified financial advisor will help you ensure that there is proper planning and investment for your long and short term goals. Managing finances can be complex but the financial advisor will help you direct your money towards your needs.

“Advice from a professional financial adviser will help you manage your inheritance better. If invested correctly; you and your family will benefit greatly in the long term,” says Ochse.

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