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Barwon Financial Planning
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Article 1 (2015)

How not to blow an inheritance

Dealing with an inheritance is something that many Australians will do in their lifetime. So how do you best manage a lump sum that has come your way and use it to help you reach your financial goals?

1. Have a strategy
The first thing you can do with an inheritance is decide how
you can use it to set up financial security for your future. So
first up – have a strategy. This is important because: “Most
people run through an inheritance in two years or less,” says
Jason Flurry, the president of Legacy Partners Financial
Group. In his experience, the first mistake people make is
they “blow the money on stuff for themselves”.

2. Take stock of where you are at
If you’ve inherited money, you need to know what your
financial situation is now so you can make a realistic plan.
Your personal circumstances will influence how best to
use your inheritance. Whether it’s better to put the money
towards paying down debt, investing, your retirement or
starting a business, are all going to depend on the amount
of money you’ve inherited and what will serve you best
financially. Get your financials together and see what the
fiscal lay of the land is.

3. Don’t rush into action
If you’ve had a financial windfall, take your time before taking
action. Flurry says, “The temptation is to feel like you have
to do something, but you really don’t. Sit down and dream a
little, then back into the numbers and ask, ‘How can we do
this with the least amount of risk?’” Acting too hastily can lead
to trouble. Paying off your mortgage without thinking about
future income in your old age, for example, could leave you
living debt-free but in poverty. “If your house is paid for but
you run through everything else, you can’t use shingles to
pay for groceries,” Flurry says. “Then what do you do?” “You
don’t want to be in that situation.”

4. Get advice
It’s a very good idea at this point (if not before) to speak to
your financial adviser, who can really help you plan how to
use and grow your inheritance. Your adviser can also help
you with any tax implications of your inheritance.

5. Enjoy
While it’s good to use an inheritance wisely, this doesn’t
mean you can’t enjoy some of it immediately. When you
create your strategy, factor is some fun spending. It’s all
about balance.

Contact Barwon Financial Planning for further information on 03 5222 5895 or visit barwonfinancialplanning.com.au
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