Use your inheritance to anchor your financial future

Receiving an inheritance can stir up intense feelings of grief which make it difficult to make sound financial choices. Follow these simple guidelines for making clear-headed decisions to manage your windfall.

Proceed with caution. Consider parking the money in a CD or money market account where it can earn a little interest while you come to terms with your loss as well as your new financial situation.

Determine the tax implications. Your inheritance may be subject to inheritance taxes by the state and/or federal government. Before you start spending, get the right tax assistance to make sure you set aside enough to cover your taxes.

Stick to your plan. Even a modest inheritance can help you make great strides toward your financial goals. If you have been working toward paying off your credit card debt or beefing up your retirement savings, for example, allot a portion of your inheritance toward these objectives. You’ll be moving closer to your goals while steering clear of impulse spending. (See Choose Between Debt Reduction and Investing for more guidance.)

Re-assess your overall strategy. Receiving a sizeable inheritance could change your risk tolerance , financial timeline, and tax situation, all of which could make it necessary to modify your investment strategy. If you’re unsure about how to make such changes, consult with a qualified financial planning professional. (See Hire a Financial Advisor for more information.)

THE BOTTOM LINE: Once you’ve dealt with the accompanying emotions, managing an inheritance is just like any other financial decision: a combination of common sense and a focus on your financial goals will help you make decisions that will have a positive impact on your bottom line now and well into the future.