Using your inheritance effectively

Making informed decisions about managing the funds wisely

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.

Analyse your financial situation

Create an individual cash flow plan: This involves thoroughly analysing your financial situation, goals and future needs.

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 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 it’s 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 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 and goals. 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 modelling plan when managing inherited wealth

Clarity on financial goals

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.

Effective wealth management

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.

Risk assessment

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.

Tax planning

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.

Retirement planning

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.

Estate planning

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.

Time to provide a clearer picture of your financial situation?

Creating a cash flow plan is a powerful tool for managing inherited wealth and ensuring it serves your short- and long-term goals. Providing a clear picture of your financial situation enables you to make informed decisions about investing, saving and spending, ultimately helping you achieve financial security and success. If you would like to find out more, please get in touch with us.

THE VALUE OF YOUR INVESTMENTS CAN GO DOWN AS WELL AS UP, AND YOU MAY GET BACK LESS THAN YOU INVESTED.

THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE.

ESTATE PLANNING IS NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.

A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN. YOUR EVENTUAL INCOME MAY DEPEND ON THE SIZE OF THE FUND AT RETIREMENT, FUTURE INTEREST RATES AND TAX LEGISLATION.