Friday Q & A – Managing a windfall

Originally written in 2019. Some rules, rates and figures have changed since, so check the current details before relying on them.

Question

I’m halfway through spending my $500,000 inheritance due to not having a plan or a job. Is it too late to save myself?

Answer

Without knowing any more about your situation (especially your age, health and expenses), today’s always the best day to improve your situation so it’s great you’ve taken the step to investigate your options.

You’ve been fortunate to inherit a lot of money and $250,000 is still a lot of money that can be used as a home deposit or you can invest to grow it and earn an income.

Momentum can be a hard thing to stop and unfortunately, at the moment the momentum is going the wrong way so I would first focus on a plan to stop this momentum and stop drawing on this money and the only way to do this is to reduce your expenses and increase your income.

To reduce your expenses you really need to figure out where you’re spending your money as it’s likely you’re spending (wasting) money on things that you don’t need or value. Once you’ve done this, come up with a spending plan and set-up separate bank accounts with automatic transfers to help you stick to your spending plan. Another tip would be to take these funds off yourself to eliminate the temptation. Some people use a Notice Savings Account.

Increasing your income can be more difficult depending on your situation and age however assuming your health is fine I’d work on a plan to get back into the workforce by working out what you’re passionate about, what you’re good at and what experience you have. With the inheritance, you could set-up a plan to draw on it further to study or train to increase your chances of employability however make sure you have a plan that you know you can stick to.

You have a good opportunity, but I’ve seen these funds disappear very quickly, so the sooner there’s a plan the better. If you don’t think you have the knowledge or willpower to do this alone, a licensed financial adviser can give personal advice and help keep you accountable.

I cover this in more detail in my video, If I Inherited $1,000,000 in 2024, I'd Do THIS, on the Edvest YouTube channel.

See what other Australians have said on Reddit: r/fiaustralia thread on the steps to financial independence, which mentions Kyle's spreadsheet.

Explore free Australian finance education from Kyle Frost at Edvest.

Related videos and resources

• If I Inherited $1,000,000 in 2024, I'd Do THIS

• Best High-Interest Savings Accounts | Australia

• Edvest - independent financial education by Kyle Frost

• Reddit: Steps to FI, with Kyle's spreadsheet (r/fiaustralia)

• Kyle Frost on YouTube: Edvest channel (Australian finance, investing and debt recycling videos)

• Should You Pay Off Your Mortgage or Invest? (A Historical Backtest)

• Debt Recycling Explained: The SECRET Mortgage Strategy to Get You AHEAD FINANCIALLY (Kyle Frost interviewed by Will Bell Mortgage Broker)

• Podcast: FHSS explained, mortgage debt & hard questions with Kyle Frost (The Australian Finance Podcast, Rask)

About the author: Kyle Frost is the founder of Millennial Independent Advice and Edvest. He previously worked in financial advice and now builds tailored financial models that show the levers, trade-offs and risks in big money decisions. Watch more on Kyle Frost's YouTube channel.

Connect with Kyle Frost: LinkedIn | Instagram (@kylefrostfinance) | YouTube | Edvest