How To Use Your Inheritance To Invest Sustainably

Receiving a financial windfall can be bittersweet, depending on the circumstances. But no matter what, it’s always important to be a good steward of your wealth. If making an impact on the world with your financial decisions is a priority...

Receiving a financial windfall can be bittersweet, depending on the circumstances. But no matter what, it’s always important to be a good steward of your wealth.

If making an impact on the world with your financial decisions is a priority for you, it makes sense to align your inheritance with those values. Here are a few considerations and tips for sustainable investors looking to turn a windfall into something impactful on a larger scale.

Being a Good Financial Steward

Being a good financial steward of your wealth means managing your windfall in a responsible and forward-thinking way. As you consider the best use for these funds, remember to balance your financial needs with your desire to be a good steward.

Important financial priorities to focus on first could include:

  • Building an emergency fund
  • Paying down debt (especially high-interest credit cards or personal loans)
  • Starting or contributing to a retirement account
  • Establishing or adding to a 529 or college savings account

Once you’ve taken care of these more immediate financial concerns, consider how to make sustainably focused decisions with the remainder. 

Ask yourself, do you know how the donor wanted or envisioned you to use the gift?

For example, if they were passionate about climate change and conservation, environmentally-focused investments may be a natural fit.

Making these types of considerations is overwhelming, but there’s no need to rush into a decision. Take a breath, and go slow. 

It’s not necessary to make this significant financial decision while grieving the loss of a loved one. Set the money aside, and address it when you feel clear-headed and ready.

4 Tips for Investing Your Inheritance Sustainably

Below we’re sharing four essential tips for using your inheritance in a sustainably focused way.

Tip #1: Determine a Fulfilling Financial Goal

This may sound obvious, but it shouldn’t go without saying: The way you choose to use your windfall should be fulfilling. In other words, use your inheritance purposefully and meaningfully.

Depending on the size of the windfall, that could mean using all of it to address your current needs, like growing retirement accounts, paying off debt, etc.

If you’ve always dreamed of starting your own business or philanthropy, this could be the financial cushion needed to pursue that goal. Or, you may have some eco-conscious goals like installing solar panels, buying an electric car, changing your home’s heat source, etc. If your more pressing financial needs have been met, addressing these other eco-conscious goals could be a meaningful use of your inheritance.

At the end of the day, you are the only person who needs to be satisfied with how you handled the windfall. Thinking over what’s meaningful can help you avoid feelings of regret or remorse later down the line.

Tip #2: Fund SRI-Focused Investments

Of course, SRI-focused investments are a sensible option for utilizing your inheritance sustainably.

Over the last several years, socially responsible investing has shifted from a popular trend to a legitimate investment strategy that millions of people follow. This movement continues to grow in popularity as investors focus on impactful investments that don’t sacrifice returns. In fact, SRI is an effective way to increase your net worth while supporting companies that aim to do good in the world—and avoiding those that don’t.

At Woven, we value working with socially conscious investors. Our strategy is to address sustainably focused portfolios the same way we’d manage standard ones by diversifying and maintaining a long-term focus.

Tip #3: Donate to a Charitable Organization

If there’s a particular charity or organization close to your heart or that of your loved one, now may be a great time to consider making a sizable donation. Giving a portion of your inheritance to a reputable charity means you’re directly impacting a cause you’re passionate about.

Don’t forget offering financial support to non-profit organizations can also help reduce your taxable income. For the 2021 tax year, you can deduct eligible charitable contributions up to $600 even if you take the standard deduction.

Tip #4: Work With a Team That Cares

One of the best ways to manage a windfall is to prepare for it ahead of time. Creating a plan proactively takes the emotion out of it, giving you room and time to grieve the loss of a loved one when it happens.

Whether you’ve recently received an inheritance or would like to plan for one, we’re happy to help. We’re a sustainably focused firm ready to address your financial needs and desire to make impactful decisions with your wealth.
If this is something you may be interested in, reach out to schedule a time to talk with us.