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\u201cDo you like working where you are? Do you want money to change the trajectory of your career? Is it something you want to give to your kids?\u201d she says.<\/p>\n
Gold Coast-based financial adviser David Currie agrees, saying identifying what his clients want in life, beyond buying a sports car or taking a luxury holiday, is the first step in planning.<\/p>\n
\u201cWe think about what their goals are. We think about do they need an emergency fund, do they have some bad debts that they need to get rid of? So then we tackle the hierarchy of bad debts. We look at emergency savings plans, and then once we\u2019ve done that, we look at [if they are] family planning,\u201d Currie says.<\/p>\n
He says seeking advice from a financial adviser is useful, but it depends on the size of the inheritance. He suggests that more than $30,000 to $50,000 would justify professional advice.<\/p>\n
Should you build an investment portfolio?<\/p>\n
Although there may be a temptation to use newly inherited money to build an investment portfolio, it\u2019s worth considering what else you should spend the money on and your capacity for risk.<\/p>\n
\u201cWe talk a lot about risks as well, we talk about, yes, you\u2019ve come into a lot of money, but we also don\u2019t want to lose it. If your goal is capital preservation and growth, we always have to be diversified in our approach to investing that money,\u201d Currie says.<\/p>\n
\u201cTheir goal might be to grow a portfolio, it could be to pay off their mortgage, or it might be to buy an investment property. Or it could actually be a combination of all these things, and we need to figure out which one to do first \u2013 and that\u2019s where strategic advice is really important.\u201d<\/p>\n
Thomas says inheriting a large sum of money doesn\u2019t change your existing financial habits: \u201cGaining a lot more money is not going to change your financial outcome if your money management habits are poor,\u201d she says. \u201cYou have to be really honest with yourself about how you\u2019ve managed your money so far.\u201d<\/p>\n
There\u2019s life before death<\/p>\n
As a generation of parents lives longer and holds the largest pool of inheritance in Australian history, it\u2019s becoming increasingly common for the bearers of those gifts to bestow them early. Leveraging a financial gift earlier than expected can be hugely beneficial for long-term growth, though often parents wait until they trust they will see the benefits of the money changing hands while they are still alive.<\/p>\n
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\u201cYour parents don\u2019t like seeing you go on holidays and then saying you don\u2019t have any money,\u201d Thomas says with a laugh. \u201cI think they sometimes do get nervous. If you think about risk appetite in retirement, they probably have a lower risk appetite than someone who\u2019s younger and goes, \u2018I\u2019ve got all this time.\u2019\u201d<\/p>\n
Likewise, she says parents aren\u2019t frequently thrilled about giving money to go straight into their children\u2019s investment portfolio. Instead, she suggests talking to parents about gifting money for things such as private school fees for their grandchildren to free up cash to put towards building that portfolio.<\/p>\n
\u201cIf you don\u2019t have to pay for that schooling for your child, then that money can be diverted into setting up your own investments,\u201d she says.<\/p>\n