5 Smart Things To Do With Your Settlement Money
/Although no one wants to have to go through a personal injury claim, by utilizing the services of the best-rated lawyers, the settlement money you receive could be the financial aid you need to get your life back on track. The moment your settlement is awarded, you’ll likely feel a mixture of emotions, including relief. But it’s important not to get too swept up with a big influx of cash, otherwise, you risk losing it all within the next few years. Here are five smart things you should do with your settlement money.
Double-check the facts about tax
Before you finalize any settlement, it’s always best to get advice on tax. Although personal injury and physical sickness payouts are usually exempt from tax deductions, other parts of the settlement may not be tax-exempt. Some examples of settlements that do require you to pay tax include breaches of contract, copyright infringements, lost profits, payment for lost wages, and punitive damages. Failing to pay the proper tax on your settlement is a form of tax fraud, and so it’s important to get your head around what you need to pay.
Consider hiring a financial advisor
It’s not every day that you receive a large settlement amount, and so it’s unsurprising that for most people handling a large amount of money is something they are not used to. The novelty of wealth and the emotion of the settlement can be a deadly combination, leading to poor financial decisions that you may regret later down the line. To avoid any rash decisions and to ensure that you use your money wisely, consider hiring a financial advisor to help you make the best decisions for your situation.
Boost your savings
Ideally, every household should have a savings account with enough funds to cover at least six months of living expenses. It can be a struggle to put this money together on your own, so use your settlement money to your advantage and give yourself the safety net you need for the future.
Pay off debt
It may be tempting to pay off your debt, first, but this is how folks end back in a financially vulnerable situation. A situation where you have to pay for an expense, but do not have a savings account to fall back on and have to resort to using credit cards. Once you have tended to your savings account, create a plan for paying off high-interest credit cards and any outstanding personal debt.
Invest
Last, but not least, it’s time to make your money work for you by investing. Invest in your education, invest in your home, and invest in a business. You may wish to run your ideas by your financial advisor first to make sure they are wise, but enjoy being able to invest in things that matter to you.
So there you have it - five smart things to do with your settlement money to make it last. Have you ever had a large financial payout? What did you choose to do with the money? Let me know in the comments.
