Breathe
Having this much liquidity thrown onto you all in one go can often be stressful. The weight of responsibility to manage this new wealth correctly, pressure and conflicting advice from family and friends, seemingly endless investment opportunities can all feel overwhelming. These are all natural feelings – the key here is to keep the circle small, write up a plan, then follow through.
Take it one step at a time
First things first, don’t tell anyone unless you absolutely need to. The more ears that catch wind of your windfall, the more open hands start to extend to you. Only discuss the inheritance with trusted advisors and potentially close family members such as a spouse, parent, or child.
Ensure all taxes are correctly paid off on the inherited capital to ensure you aren’t unwittingly creating any future tax liabilities.
Next, clear off any personal debt such as credit cards or outstanding loans – interest on these is often higher than the average return of most low-mid risk investments.
If you haven’t already created a financial plan for the different stages of your life leading up to retirement. This unexpected windfall can be a way to accelerate your financial plan by clearing your mortgage sooner, paying for planned home improvements ahead of schedule, or depending on your risk appetite, increasing your contribution to your alternative investment, growth pension pot earmarked for retirement. Managing this wealth discreetly and sensibly can allow you to either fast-forward retirement, or increase the level of financial flexibility when you reach retirement if you opt to follow the same financial timeline.
Your life priorities, financial circumstances and needs change through your life, meaning there are different financial aspects you will need to consider.
Start your financial journey
Foundation stage: 20s
Managing your finances in your 20s isn’t always a priority even though you may be taking on your own financial responsibilities for the first time; it’s good to start with the basics.
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Build on your foundation
Accumulation stage: 30 to 40
Even when day-to-day life is really busy, it’s important to keep your financial future in focus with things like pension planning and making the most of other tax-efficient investments.
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A time for growth
Growth stage: 40 to 55
They say life begins at 40, and these peak earnings years are a good opportunity to enjoy your hard-earned money and maximise your savings and investments.
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Establish your financial plans
Establishing stage: 55 to 65
As family life changes and you start to think about stepping back from work or retiring completely, you’ll want to make sure any decisions you make are backed by solid financial plans.
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Time to enjoy your retirement
Preservation & Reward stage: 65 to 75
Now’s the time to enjoy the financial security that’s come from your hard work and careful financial plans by using your savings and investments in the most efficient ways to enjoy your life.
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The key to conservation
Conservation stage: 75+
In your later years, you’ll be thinking about what you can give to others now and in the future, and organising your assets to make sure your family don’t pay more tax than they need to.
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Invest in private equity
Investing in private businesses has historically been one of the most common ways to build generational wealth and every corporate behemoth we see dominating the stock market bulletin boards today all had humble beginnings.
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Invest in fixed income
This is essentially private debt. There are in general three types of debt investors can invest their capital in. Gilts: government bonds where you lend the government money.
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