A bonus, inheritance, or other lump sum of money is a great opportunity to improve your finances if handled properly. Ensure you make the most of your money by following these four steps.
Step 1: Don’t make hasty decisions.
It’s important to realize that you don’t have to make any decisions right away about what you want to do with the money. In fact, you probably shouldn’t. Receiving a lump sum can lead to a lot of strong emotions – especially if it’s an inheritance after a loved one passed away – so it’s a good idea to work through those emotions before you make any decisions.
Step 2: Consider keeping the money separate.
In community property states like Texas, inherited money is a separate asset if you don’t commingle it with your spouse’s assets. Keeping an inheritance separate could help protect it in the case of divorce or if your spouse were to be sued. I don’t practice law so consider consulting an attorney, especially if you’re dealing with a large sum of money.
Step 3: Seek out security while considering your options.
Your primary goal while considering what you want to do with your money should be to keep it safe. You can do this by keeping it in an FDIC insured account like a savings account, money market account, or certificate of deposit (CD). You won’t earn much, but you won’t lose any money either. The FDIC coverage limit is $250,000 so one account is sufficient if you have less than this amount, and you can use more than one bank if you need more coverage.
Step 4: Be careful when getting professional advice.
Do your homework before trusting someone with your money. Ask about qualifications, experience, and credentials when interviewing potential financial advisors. Be sure to ask how advisors are paid and how much they'll earn if you follow their recommendations. This is especially important if you're interviewing a commission or fee-based advisor since hidden sales commissions can be a huge conflict of interest. Working with a fee-only advisor like us will help keep the focus on advice rather than sales. You can get a list of questions to ask a potential advisor from the CFP Board’s website (www.cfp.net).
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com.
