Using Your Inheritance Effectively

Using Your Inheritance Effectively

Inheriting wealth can be both a blessing and a challenge. It presents an opportunity to improve your financial security and accomplish your goals but it also involves managing the funds wisely. Cash flow modelling is essential to help you make informed decisions about using your inheritance effectively.

Using investment growth, inflation and interest rates assumptions, cash flow modelling creates a comprehensive picture of your current and future financial situation.


Create an individual cash flow plan: This involves thoroughly analysing your current and future financial situation, your goals and help you to see how to achieve the financial future you desire.

Gather information about your current financial situation: This includes your income, expenses, assets (property, investments, pensions, etc) and liabilities (such as loans).

Establish an overview of your assets: Determine the value of your property, investments and savings. It’s essential to have a clear understanding of your net worth.

Identify your financial goals and commitments: Consider short-term and long-term goals, such as saving for a house, funding your children’s education, a wedding, a new car purchase, a luxury holiday, starting a business, selling your business or planning for retirement.

Create a lifetime cash flow model: Consider your goals and commitments – this plan should project your income, expenses, assets and liabilities over time. It will help you estimate your future cash flow and determine if you’re on track to achieving financial independence.

Evaluate your risk tolerance and investment strategy: Assess whether your investment strategy aligns with your risk tolerance and financial goals. Adjust your portfolio as needed to ensure its optimised for your needs.

Plan for potential risks and liabilities: Ensure you have adequate insurance coverage to protect against unforeseen events such as death or disability. Additionally, consider strategies to minimise tax liabilities for yourself and your beneficiaries.

Develop an investment strategy for inherited wealth, capital and surplus income: If you inherit wealth or have additional income, develop a plan to invest this money wisely to grow your assets and achieve your financial goals.

Monitor and review your cash flow plan regularly: Regularly update your cash flow plan to reflect changes in your financial situation, goals, desires and market conditions. This will help you stay on track and adjust to maintain your financial independence.

By following these steps, you’ll have a comprehensive cash flow plan that provides a clear picture of your current financial situation and helps you plan for your future needs, goals and desires. This will enable you to make informed decisions about your finances and ensure you’re on the path to achieving and maintaining financial independence.

Here are some benefits of creating a cash flow plan when managing inherited wealth. 


Having a cash flow plan helps you identify and prioritise your short- and long-term financial objectives, such as buying a house, starting a business or funding your retirement.


With a clear understanding of your financial situation, you can make better decisions about investing, saving and spending your inherited wealth, ensuring that it serves your needs and goals over time.


By analysing different scenarios and their potential impact on your finances, a cash flow plan enables you to assess and manage risks associated with investments and other financial decisions.


Inheritance often comes with tax implications. A cash flow plan can help you understand your tax liabilities and plan accordingly to minimise the impact on your financial health.


If you have long-term personal goals like funding your retirement, a cash flow plan allows you to see how much you need to save and what returns you need to achieve to meet those objectives.


If you want to pass on wealth to your heirs, a cash flow plan can help you determine the most suitable strategies for preserving and distributing your assets following your wishes.

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