What To Do With An Inheritance?

Whether you receive your inheritance early or when your parents pass, it can raise questions about what to do with the capital assets bestowed to you. Depending on the contents of your inheritance, you will have one, if not a few options which you can use to grow your money or purchase an asset. Saved capital can be used to buy or renovate property, invest in a diverse range of commodities, pay off debt or to use recreationally in this regard. A financial advisor can tell you what your options are when it comes time to leverage your inheritance for the best outcome. In the following blog article we will outline several investments which can be made following receivership of a large lump sum. We are to list the options and discuss how this money can grow.

What Deposit Do I Need To Buy A Property?

Most lenders will offer finance when you have in the range of 5-20% of the total asking price in capital. Anything less than 20% will however attract Lender’s Mortgage Insurance (LMI) which can equate to $20-$30k or more. Given the average price of a house in the Melbourne housing market is just over $1 million ($1,022,927), with an inheritance between $50,000 and 200,000 you will be in the market for a house assuming you can afford to make monthly repayments on the loan (servicing). Capital growth in housing has historically been high, so a house can increase in value over the life span of the loan, thus growing the inheritance you received.

Another option when receiving a large lump sum is to renovate your existing property with additional levels, rooms, storage options and other features. Landscaping, kitchen and bathroom upgrades and additional built-ins can be bought to increase the value of the house (at least, in the short term) and improve the standard of living it offers. A home renovation job can cost five figures, and is a lot of fun to imagine.

How Can I Grow My Money?

Capital growth in commodities other than real estate fluctuates in the short-term, but can be a long-term source of income if left untouched. One stock market metric, average closing price, as evaluated by Dow Jones grew by 152% in ten years. While stock markets tend to fluctuate in the short term, over time they frequently increase in value consistently. Australia’s stock market has proved particularly robust during recent global financial crisis and tech crashes which were very damaging overseas. Fintech companies now make investing in stock markets as easy as downloading an app. One report saw an approximately 7% return on investment using financial technology in the space of a year.

How To Consolidate Debt

If you have a mortgage or other personal debt, including: student loans, personal loans or business loans, an inheritance can be a great asset with which to pay off the entirety of your outstanding arrears. Cleaning up your financial liabilities like this is a great way to ensure your asset pool doesn’t shrink due to interest payments required as part of the loan terms. 

Taking A Holiday With Inheritance

If you have a clean debt ledger and control your assets effectively then an inheritance is a great means for affording a holiday or other recreational expense. It’s probably wise to think of any family you have whom would be invested in retaining the majority of the inheritance capital, but given critical judgement during decision making this is one option you have when you receive your parents’ bestowment.

Contact Pillar Financial

Call our friendly team on 1300 730 309 or reach out via our contact page to ask what we can do for you as you conclude your year this holiday season.