We know a personal injury accident causes physical injuries and anguish, but it can also be financially stressful. So, When your injury settlement arrives, it can be a big help and relief. You want to make sure that you don’t lose or spend all of it and then stuck in the same financial situation. That’s what happens to most people who receive a large cash settlement if they don’t know how to manage it properly.
Your settlement doesn’t come with instructions, so you may want to speak with a Tampa personal injury attorney about the best way to use your compensation. In the meantime, here are 7 smart things to do with your settlement:
1. Understand the Tax Implications
Your settlement may be subject to taxes, exceptions usually include settlement payments for personal injuries or physical sickness. You may also have to pay taxes on top of attorney’s fees. Also, your settlement might be a combination of taxable and tax-free.
2. Create a Plan
Creating a plan for your settlement funds is essential. A plan helps you keep your settlement on a budget, so you don’t spend your settlement funds faster than you should. Look at your settlement as a tool that can help you through this difficult time. Be sure to create a plan that lets your settlement money work best for you.
Think about how long you need your settlement funds to last-if you have lifelong injuries, your money needs to last a lifetime. Strategize your plan based on your injuries, your goals, and what you need and want your money to do for you in the long term.
3. Get a Good Financial Advisor
Because of the emotional rollercoaster that a financial windfall can cause, you should sit down with a financial advisor who specializes in sudden wealth management. This can help for when a family member or friend asks you for money, you can tell them you need to run it by your advisor first. Let the advisor be the “bad guy” to tell them “No”.
4. Pay Off Debt and Save
You’d be surprised at how many people don’t think to pay everything off when they find themselves with a huge settlement. First, you need to first pay off debt, such as credit cards, and loans. Once this is done, you need to create your emergency fund (a minimum of six months of living expenses) incase something like this happens again. Next, you should set aside your retirement fund.
5. Invest in Education
This is a perfect time to start investing in education. If you have children, you can put money into education funds for them. You can also invest in your own financial future by going school.
6. Take Care of Your Financial Musts
There will always be expenses in life, even if you are debt free. You should make sure that bills for daily living expenses are taken care of and added to your monthly expenses.
7. Invest in Income-Producing Assets
If you need your settlement to last a lifetime, but you don’t see it meeting your needs, you might still need additional income. You could obtain this by investing your money. You could invest in an annuities, or CDs for passive income. There are also market funds, stocks, bonds, and investment properties that can help your settlement income grow.