Is it really a shocking statement to say that 1 out of every 3 people blow their inheritance? I’ve seen this happen - someone inherits money and it is gone within 3 months to a year. All of the money is gone! It doesn’t matter if it is $25K or $1 million. Somehow these people find a way to blow it. I got a subscriber question from someone that inherited a chunk of money and they want to make sure that they don’t blow it or lose all the money. I wanted to be sure to answer their question but I also wanted to make a video for you. I wanted to share the information so that if you find yourself in this situation, you will be prepared to be able to put that money to work. Not only do ⅓ of people blow their inheritance, but it’s not just average people. Statistics show that with wealthy people, OVER 70% of the wealth transfer doesn’t make it past the second generation. Let’s find out what this reader had to ask: “My spouse and I will be Inheriting about $750,000 to $80,000. The payoff balance of our mortgage is estimated at about $180,000 at 3.5% APR for 30 years. Would it be worthwhile to allocate some of the money we are inheriting to pay off the mortgage loan? ” I told you this was a fat inheritance ¾’s of a million dollars! The only inheritance I ever received was about $8,000 from my grandmother. I used most of that to pay off student loan debt, and some for saving and investing. I can see how tempting it can be to go out and buy things when you get a chunk of money. A new house, new car, new clothes, new computers, etc. 💸 But for this reader the biggest question is regarding their mortgage. They are locked in with a great mortgage rate, they can continue to claim this mortgage interest on their taxes. You are probably thinking that I have spreadsheets and I am crunching numbers to see what will be best over the long term. Considering things like investment returns, interest calculations, etc. There was a time when I would do exactly that. Obviously there is risk involved. Now if they do pay off the mortgage, they are debt-free and the return is automatically that 3.5% interest. They still have well over ½ a million dollars that they could use to take a vacation, buy some of the things they need, and invest. So while there was a time that I would crunch the numbers and do the spreadsheets; there are other things that we need to take into consideration. How much do they currently have saved, how much are they able to save, are they putting money in a 401K or Roth IRA? What I have come to realize is that if someone is looking at paying off a mortgage or another large debt vs. investing the money and potentially making a net positive return - what it comes down to is what is your investment personality. What is your risk tolerance? What happens if you make a small percent or lose money in your first year? 💸 I see a lot of people doing this. Then the reality is that instead of making a better return by investing, they end up losing and they have regrets. If I were to put myself in their situation what would I do? 🤔 The funny thing is I am in the process of coming into a large chunk of money. It is not an inheritance but rather the sale of a business. I could use this money to pay my mortgage off and be completely debt free. Eventually, I will do that - but for the first year or so, I am going to sit on the money. I am going to put most of it in cash, maybe some short-term investments, maybe some in the market. For the most part, I am going to sit on that. I want to see how things unfold. One thing to remember when you come into a large chunk of money through an inheritance or otherwise: You don’t have to make a decision today, or tomorrow. You can sit on the money and wait. The last thing you want to do is put your money into something that you don’t understand. So what would I tell this person to do I would tell this person to wait. To sit on if for at least a year before making a decision. You may think that you have it all figured out, but we all know that ‘life happens’ -things can change so quickly. Things may be completely different 6 months from now. 🤔 Take the time to make the best decision for you. You don’t have jump right away just because you are listening to what everyone else is telling you to do. ▶ Check out my gear on Kit: ★☆★ Want More Good Financial Cents? ★☆★ 💻 Check out my blog here: Listen to my podcast here: 🎙 Pick up my best selling book, Soldier of Finance, here: 📗 Connect with me on Twitter: My most favorite inspiration T-shirt line, Compete Every Day: 👕 ...(read more)
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