While inheriting wealth can be a blessing, if you aren’t sure what to do with it, it can also be a stressful time. Receiving an inheritance is a great opportunity to improve your financial situation and get closer to your goals. However, this means that you must manage this money wisely. Learn how you can make informed decisions with your inheritance
This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice.
Cash flow modelling for inherited wealth
In order to help you make informed decisions about your inheritance, you will need to do some cash flow modelling. Cash flow modelling takes investment growth, inflation, and interest rate assumptions into account to build a comprehensive picture of your current and future situation.
The first step is to gather all the information you have about your current financial situation, including your income, assets, expenses, and liabilities. Then you can determine the value of your assets.
Next, you will be able to identify your short, medium, and long-term financial goals. When you’ve established these goals you can estimate your future cash flow and gauge your progress toward financial security.
As part of this process, you will have the chance to evaluate your risk tolerance and figure out how aggressive of an investment strategy to utilise. You’ll also get the opportunity to ensure you and your family are protected with adequate insurance should anything happen to you. Plus, you can leverage tax liability-minimising strategies to the benefit of your beneficiaries.
From there, you will be able to develop an investment strategy for your inherited wealth, any capital, or surplus income. It’s important to continually monitor and review your cash flow plan. Adjust as needed for any changes in financial situation, goal adjustments, or market fluctuations. Of course, we always advise going through this process with a professional. Doing this will help you stay on track and help you reach financial independence.
Benefits of cash flow modelling
The biggest benefit of cash flow modelling is that it provides clarity on your financial goals, helping you to identify and prioritise your financial objectives. When you understand the full picture of your situation, you can make more informed decisions about how to handle your inherited wealth.
Let’s review some other benefits:
- You can ascertain your attitude toward risk by analysing different scenarios and their potential impact on your finances and deciding how much risk you are willing to take.
- Of course, inheriting wealth comes with some tax implications. Cash flow modelling helps you understand your liabilities and lets you plan accordingly.
- It will also help you see how much you need to save for retirement and what kinds of returns you need to get there.
- Finally, a cash flow plan will allow you to accurately plan for your estate. You can identify the best strategies for preserving and distributing your wealth according to your wishes.
Do you need help sorting out your new financial situation?
Don’t let the news of an inheritance coming your way overwhelm you. Working with a financial adviser to create a cash flow plan will ensure your windfall serves your short, medium, and long-term financial goals. Understanding where your finances currently are, deciding where you want them to be, and devising a plan to help you get there will help you make better decisions about investing, saving, and spending. For help sorting out your new financial situation, get in contact with the experts at Dental & Medical Financial Services today.