The baby-boom generation is starting to come into its inheritance. But how well are you going to manage your windfall?

A reader from Texas speaks for many of her peers: "We recently received an inheritance," she writes. "But we have never had money to invest and are completely at a loss."

Financial planners see heirs making all too many mistakes:

* Squandering money. In their excellent "Managing Your Inheritance" (Times Books, $15), Emily Card and Adam Miller write of a friend with modest earnings who unexpectedly inherited $125,000. Thrilled, he and his wife took a cruise, redid the kitchen and living room, hit the best restaurants, and generally lived high.

Three months later, they had $35,000 left--with nothing set aside for their children's education or their own retirement. Card and Miller, both financial advisers, put their friend on a budget and helped him invest what he had left. But he'd lost his chance to build a major nest egg.

* Standing pat. Some heirs say, "I'm not even going to look at what I got," says psychologist and planner Sharon Rich of Womoney in Belmont, Mass. "They just do what their parents did." Others feel that their parents would be upset if they sold certain cherished stocks.

But what's good for an older parent is seldom good for someone middle-aged. And besides, who says your parents were immune from investment mistakes?

* Delusions of wealth. "People often have unrealistic ideas of how much 'big money' is, or how far their inheritance will carry them," says planner Harold Evensky of Evensky, Brown & Katz in Coral Gables, Fla. They might quit their jobs or jump to a wealthier mode of life, then discover they can't sustain themselves.

When you come into money, don't do anything right away--not even pay off credit-card debt, says planner Pat Kambourian of Raskob/Kambourian Financial Advisors in Tucson.

If you clean up your cards without reducing your expenses, you'll soon be in debt again. That might call for a second dip into your inheritance, and then a third. You'll have spent the money and have nothing to show for it.

When money comes your way, start by listing the things you'd like to accomplish, Kambourian says. Rough out a budget, deciding how much of the windfall, if any, you'll use for current expenses.

If you haven't had decent health and liability insurance, get them now. If you haven't been putting much into your company's 401(k), increase your payroll deduction to the max. Then use your inheritance to plug the gap in your take-home pay.

Don't touch an inherited IRA until you've seen an accountant or tax planner. How much tax you pay depends on how you draw the money out.

If you want to have some fast fun with your money, blow 5 percent. But conserve the rest, Card and Miller say. Their thoughts on how to approach your good fortune:

* On a modest inheritance (less than $50,000): Invest for retirement and your children's education. Your life won't change much, but you'll feel more relaxed.

* On a moderate inheritance (up to $250,000): You can afford more pleasures (big vacations, extra purchases) while still padding your education and retirement funds. But don't quit your job unless you also have money of your own.

* On a major inheritance (up to $1 million): You might be able to flee the office, depending on your age. Or you might change careers or do nonprofit work, and also live at a higher level.

Even larger inheritances usually come with a team of advisers to help you out.

Keep some of your inheritance in a cash account, for emergency use or to cover big bills you know will arise in the next two years.

Divide the rest between stocks and bonds, held individually or in mutual funds. Conservative accounts rarely exceed 60 percent in stocks.

To make a well-invested portfolio last for life, withdraw no more than 5 percent of the original assets per year, in real, inflation-adjusted dollars, Evensky says. For example, say you inherited $100,000 with inflation at 3 percent. You'd take $5,000 the first year, $5,150 the second year, $5,305 the third year and so on.

There's no guarantee this system will work, but it often does. It pays to be careful with the biggest check you may ever get.