If you're a woman who has recently received a large cash inheritance, you need to take a few important yet simple measures immediately from a financial planning standpoint. Here they are:
First things first If you're married, you need to start by deciding whether you intend to continue holding the money in your own name or jointly with your husband. This is a sensitive issue and either decision could have long term ramifications. In the end, this is a personal call that will hinge upon your own beliefs and situation. Just make sure your inheritance doesn't fall prey to divorce proceedings, as they sometimes do!
Pay off expensive debt Windfall gains present a wonderful opportunity to pay off loans that could be crippling your cash flows. If you're married, consider the debt that is held in both your name as well as your husband's. Start with the most expensive forms of debt such as credit cards and personal loans (between 18% and 30% per annum) and move down further to outstanding car loans or home loans. Bear in mind that if you're well into the EMI cycle for a car or home loan (for example, more than 75% paid already) it actually makes more financial sense to not prepay the loan.
Create an emergency fund if you don't have one Establishing an emergency fund is necessary. The actual size of the fund will depend upon your monthly fixed expenses. Once you've paid off your expensive debts, aim to put away at least 6 months of your fixed expenses in an emergency fund. Park this money in a liquid fund or a fixed deposit than can be liquidated with ease. Purchase a rental property in your name Even after considering that rental yields in most locations are just about passable, and a property will require time and effort to maintain, it would be wise to consider purchasing a property in a good location with low supply, high demand, and good infrastructure. Rent represents a steady source of income which will help you be financially independent. Consider purchasing this property in your own name, singly rather than jointly with your spouse.
Take a risk profiling quiz to determine your target asset allocation Still got money left over? Take a risk profiling quiz to determine your optimal asset allocation. As a thumb rule, a high-risk taker can invest 75-80% into volatile asset classes such as stocks and equity mutual funds. For a moderate risk taker, this number is closer to 50% and for a low risk taker, this figure would be closer to 20%. Don't be in a tearing hurry to invest, but at the same time don't procrastinate. Remember that idle money doesn't grow, while inflation continues to gnaw away at your savings with startling perseverance.
Think before you spend A closing word of advice - avoid frittering away large inheritances on large purchases. Sleep on your buying decision rather than buying something expensive while window shopping. Often, the arrival of an inheritance fuels uncontrolled buying sprees that are followed with intense regret. Think before you spend! You might have more important financial goals to attend to.