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Money and mindset coach Paridhi Jain says people who receive an inheritance should take the pressure off themselves, build a balance sheet and weigh cash, superannuation and outside investments before rushing decisions.
A reader who received an inheritance says they are anxious about what to do with the money. They have a fully paid off home but have never managed this much money before.
They have also never worked with financial professionals and worry about being taken advantage of or squandering the money. Money and mindset coach Paridhi Jain says it is easy to spend a lifetime thinking that if only you had more money your financial stress would disappear. But it is not the money alone that solves the stresses, she says. It is your confidence in your ability to manage the money you have.
Jain says the way forward starts with taking the pressure off yourself to figure out immediately what to do. Sitting on a lump sum of cash can be far more anxiety inducing than people expect. There might be a nagging anxiety to do something with the money, but you do not know what. A lot of less-than-ideal decisions are made from a desire to alleviate this anxiety quickly.
You want to stop feeling this pressure, so you rush the decision. You sign up with the first financial advisor your friend recommends, or follow your uncle's well-meaning suggestion to buy a property. At least now you have decided and can move on with your life. Jain advises slowing down and giving yourself permission to take time to figure out how to make a decision you feel confident and comfortable with.
Creating Balance Sheet For Financial Clarity
However, often that anxiety just gets deferred. Before, you were anxious about doing something with the money. Now, you are anxious about whether you made the right decision. To gain clarity, Jain gets her clients to create a balance sheet.
This is a list of all their assets and liabilities, categorised into different asset classes. Those asset classes include cash accounts such as savings, investment accounts, property and so on. This gives you a one-page snapshot of your financial situation. Think about your wealth in three portions: your home, your investments inside and outside superannuation, and your savings.
You already have a fully paid off house, which is great. So the focus for you will be on your savings and investments. You will want clarity on how much you intend to keep in cash, meaning savings, versus how much you intend to invest. Jain's general rule of thumb is: do not invest money you think you will need to spend in the next three to five years.
Distinguishing Cash Needs From Investment Portion
For example, if you are going on a world tour next year, do not invest that money. Think about how much you need for regular expenses and bigger expenses in the next couple of years. You now have a rough idea of how much to keep in cash versus how much to put towards investments. When it comes to investing, there is a two-fold question of inside versus outside superannuation.
The main advantage of investing inside superannuation is the possibility of saving a lot on taxes through your super fund. The main drawback of superannuation is that the money in super will not be accessible to you until you are at least 60 to 65. So ask yourself: of the money I have available to invest, how much am I okay to not access until I am in my 60s versus how much would I like available before then?
Deciding Inside Versus Outside Superannuation
This is going to help you clarify how much to invest inside versus outside superannuation. Now, it is up to you how far down this rabbit hole you go. The goal is not to necessarily DIY your own investments. You may be happy to pay a little extra to have someone do that for you.
However, even if that is the case, having some foundational knowledge of how investing works will help you feel more confident in your ability to hire and manage the relationship with a financial professional. Investing is a big world, but a good starting point is learning how index funds and ETFs work. What do terms like asset allocation, diversification and dollar cost averaging mean, and how should one change one's asset allocation over time?
This is roughly the same process anyone can go through. Whether you have $10,000 or $100,000 or $1 million in the bank, it does not really change the foundational steps required to build financial confidence and capability. Just like, whether you are sitting in a BMW or a Toyota, the steps required to learn how to drive are the same. Paridhi Jain is a money and mindset coach who combines practical strategies with mindset transformation.
She helps clients create more freedom and fulfilment in wealth, work and life. Advice given in this article is general in nature and is not intended to influence readers' decisions about investing or financial products. Readers should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
brisbanetimes 
smh:Inherited a windfall? Your first move should be to do nothing 
theage:Inherited a windfall? Your first move should be to do nothingThis story was compiled and edited by the HeadTopics newsroom and HT AI from the reports above.
Financial Planning Superannuation Index Funds Money Mindset Inheritance Planning Paridhi Jain Superannuation Investing Personal Finance
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