Next to winning the lottery, receiving an inheritance from a relative is the next best way to get your hands on a huge fortune.
Actually, the odds of winning the lottery or receiving a substantial inheritance are equally doubtful – in fact, you’re probably more likely to get killed in a wild boar attack on Pulau Ubin than receive a fortune through either event.
But in the off chance that you do receive a legitimate inheritance and not some “Nigerian Prince” scam (do you seriously believe a long-lost relative in Africa whom you haven’t met would give you his entire fortune?), then congratulations!
Before you start spending your newfound fortune on cars, 50-year old whisky and outings at Pangaea – make sure you avoid the following 3 huge money mistakes:
#1 Failing to Get Expert Financial Advice
It doesn’t matter if you’re a frugal spender or you spend every pay check at Marina Bay Sands (MBS) playing roulette or blackjack – speak to a Certified Financial Advisor (CFA).
I can’t stress enough just how important it is to meet with a CFA after receiving an inheritance. That’s because a CFA has the financial expertise to offer the following:
- Advise you on paying off all your debts and establishing an emergency fund
- Advise you on tax implications your inheritance has (if any)
- Advise you on any inheritance items that are better to part with (ex. timeshares or anything else you don’t need)
- Advise you on where to park your money so it can grow (investing/saving)
- Advise you against making foolish purchases/investments (which you’ll hopefully pay attention to!)
You’ll need the advice of a financial professional because I guarantee you that once people smell the scent of money on you – you’ll start to receive solicitations from people claiming to have “great” investment opportunities or insurance products.
Not to mention you’ll start to receive requests for money from friends and relatives who’ll shamelessly pester you to lend them thousands or more – don’t do it.
#2 Wasting Your Fortune by Indulging Too Much
Anyone and I mean ANYONE is susceptible to losing their entire fortune by overindulging the urge to splurge. Seriously, wasting a fortune in Singapore isn’t all that hard – everything is not only so damn expensive, but there’s practically a mall around every street corner in this tiny country.
The reality is that if most of us came into a large amount of money due to inheritance, we wouldn’t know what to do with it. Well, we’d know how to spend it – that’s for damn sure.
If you have a good CFA who really cares about what’s in your best interest financially – he or she will flat out tell you that spending half your inheritance on a Porsche 911 Turbo is a dumb idea and try to slap some financial sense into you (not literally of course).
Seriously, it’s too easy to see a fortune come in go. Just ask the widow who blew a $1 million dollar fortune on a bad investment, relatives asking for money and too much indulgence.
I’m not going to say you can’t have a little fun with that inheritance money. But spend no more than 5% to 10% max – save and grow the rest!
#3 Wasting Your Fortune on Your Entourage
It’s an unfortunate fact – once word gets around that you received a huge sum of money, friends and family will congregate around you the way dung beetles hang around a fresh, steaming pile of… well, you get the picture right?
But you won’t just give your money away right? Well, that’s what everyone says. Weeks later, they’re buying dinner and drinks for an entourage of friends, family and strangers that gravitate towards the scent of suckers with money.
Look, there’s nothing wrong with giving some of your money away. That’s why there are charities – and Singapore has hundreds of them. But paying for of “free” dinners, getaways and nights out at bars and clubs for your entourage is just a needless waste that doesn’t benefit anyone.
Remember – you father, mother, uncle or any other relative that gave your that inheritance probably worked damn hard for it. You didn’t. So keep that in mind the next time you’re tempted to waste it by feeding your entourage just to feed your ego.
Personal finance tips delivered to your inbox!
Receive news, subscriber-exclusive promotions and guides on how to become smarter with money.
We promise never to spam you!