I just came into unexpected wealth – how do I balance enjoying it today and securing my future?

More wealth is going to trickle steadily from the hands of older generations (Baby Boomers and those in the Silent Generation) to younger ones (most notably Millennials) over the next few years and decades. That means huge financial windfalls are bound to fall into the hands of folks who may have no idea how to save, invest, or stick with a budget. Indeed, the worst thing one can do with an inheritance is to blow it on goods that one probably still can’t afford (think a luxury car, luxury handbags, and all the sort).

While there is more than one way to preserve generational wealth, I do think that younger heirs should think about growing such wealth through smart, disciplined investments and wiser spending. If anything, a financial windfall should be an incentive to brush up on personal finance topics so one can make the most of the wealth that’s coming their way. Remember, just because one hasn’t had to work for money doesn’t mean it should go to waste. 

That’s not to say you shouldn’t treat yourself to something special, especially if taking home the inheritance has meant losing someone close to you. It may not be easy to find a balance between spending and saving. And if you struggle to keep a budget balanced, perhaps allocating a small portion towards a low-cost financial advisor could make a lot of sense. If you have no knowledge of stocks, bonds, or other forms of investments, I’d say that hiring a financial planning pro is an absolute must for the sake of preserving one’s newfound fortune.

This Reddit user wonders how they can live in the present while also saving for the future.

It’s a tough balance to achieve for today’s young people, especially those who have been living paycheck to paycheck for most of their lives, weighed down by things like student loan debt and hefty credit card balances. In any case, one can spend more on oneself now as one adds to one’s retirement nest egg. The key is budgeting for such items. For those who’ve never had a budget, an advisor can help you learn the ropes, as you find the sweet spot with monthly expenses. 

In any case, it’s worth tabulating current expenses and seeing how it all fits into the big picture. If there’s a dream vacation you’ve been meaning to go on, by all means, put some of the inheritance to work. Just don’t spend outside of your means. The perfect way to lose a huge windfall is to spend more money that’s coming in. By chipping away at your newfound nest egg by too much (let’s say withdrawing more than 8% per year), you’ll be at risk of wiping out your fortune well before you’re ready to think seriously about retirement. 

Investing and growing your wealth is a must for young heirs.

Investing in stocks is a must for young heirs, given their lengthy time horizons that allow them to take a bit more risk than investors who are already retirement age. Unlike many of today’s young people, you should steer clear of meme stock mania, momentum chasing, options trading, and crypto speculation, all get-rich-quick types of pursuits that don’t end well for a lot of folks who participate.

Instead, taking a page out of Warren Buffett’s playbook by investing in boring, but wonderful companies with wide “economic moats” can pay big dividends over time. Indeed, there’s no shortage of materials that follow the teachings of Warren Buffett out there.

Whether you’re inclined to purchase a few shares of Berkshire Hathaway (NYSE:BRK-B), Buffett’s legendary firm that’s putting the S&P 500 to shame this year, or following Buffett’s advice by stashing cash away in a low-cost index fund that follows the S&P 500 (the index Buffett’s Berkshire has crushed since its inception), there’s more than one way to ensure you invest wisely rather than putting your wealth in harm’s way.

Don’t look to get rich, especially if your windfall has made you rich overnight. Instead, look to get rich(er) slowly and steadily. After rising 18.5% year to date (versus down 3% for the S&P 500), Berkshire shares have shown us all the power of patient value investing.

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