Receiving an inheritance of money — like getting any lump sum of money — often leaves people wondering what to do with it.

The temptation to spend it may be strong. After all, it’s money you probably hadn’t been counting on. And there are probably things you’ve always wanted to do that you haven’t had the money for.

Getting an inheritance or lump sum can feel like free money. So what do you do with it?

I won’t pretend to advise you on your individual situation (talk to the appropriate legal and financial professionals about that) but I will tell you what I’ve done with inheritances myself.

How we treat money matters

Someone once gave me advice about lump sums that made a lot of sense at the time. They said, “Don’t treat lump sums any differently than regular money.”

But that only made sense because I had already learned to be more responsible with my money. (Barely.)

In other words, if I already had a well-thought out plan and goals for my money, the lump sum becomes a way to help me achieve them faster. The issue with that of course that our plans for our money aren’t always smart or beneficial in the long run. And it can be hard to see that without hindsight.

If our goal is to indulge ourselves, an inheritance can help us do that too, but blowing through money isn’t smart. In fact it’s sad, and probably also disrespectful to the person leaving you the money. So what to do?

Give it time

First off, give it time. Unless you get an inheritance from a distant relative that you didn’t even know, you’re going to feel sad. Money isn’t going to make up for the loss you feel. You’re going to be emotional, and probably not in a place where you can think straight or make major decisions.

There may also be quite a bit of time between the moment you’re notified that you’re going to inherit money and actually getting the money. It’s possible something could happen where the amount you receive is decreased or delayed. My rule is to not spend money until I actually have it.

So give it time, and consider doing nothing with the money for a while. That’s what I did.

Next steps

Once I received the inheritance, I plopped it in my bank account and let it sit there. Then I pretended that I didn’t have it. I could have parked it in a CD or something instead of my checking account, but I wasn’t interested in “doing things” with the money yet. My goal was just keep the money safe while I took my time deciding how to handle it. (If I had received a very large amount, I would’ve put it in separate banks so as not to go over the FDIC insurance limit.)

When my bank suggested that I speak to their advisers about my larger-than-normal account balance, I said no. I’m a strong believer in the idea of not automatically using the services of people who are actively trying to get my business. Plus I wanted to take time to make reasoned and thoughtful choices.

Thinking it through

I began to narrow down options by thinking about the person who had left me the money. You don’t accumulate money by making stupid choices, and I didn’t want to do that either. So I thought about them and their financial choices.

What sort of successful investments did they make? How did they live their life? What kind of future would they like to see for me?

Someone who deliberately leaves you money wants to make your life better. I wanted to honor that, and to be a good steward of their money.

Making choices

My mom loved to decorate, craft, travel, work in her small business, and invest in real estate. Those are all things I either loved doing already or hoped to do one day, so it made it relatively easy for me to decide what to do with the money.

We took a family trip, and then I used the rest of the money as a down payment on a condo that I rented out. (And later sold.)

When my grandma died, I used the same kind of process. She’s one of the people I learned to be unconsciously frugal from in some areas. I learned that you use up scrap paper and save rubber bands, that you take care of and enjoy the things you have, and that you give generously and treat yourself now and then. I also knew that she had lived off investment income for decades.

So I’m working on doing the same kind of things with the money, which are also in line with our goals.

Many people consider paying off debt, but we’re already completely debt free, so that wasn’t on my list of priorities. I think you’re more likely to STAY debt free if you work to get out of it yourself, anyway — because that way you change your habits and don’t go back in.

The bottom line

The bottom line is I used “What would the person who gave me this money think of how I use it?” as a guide, along with “How can this money improve our lives long-term, and further our goals?”.

Have you gotten an inheritance? What did you do with it?