Rosenbaum & Rosenbaum, P.C. | August 18, 2022 | Personal Injury
Have you recently received a sizable settlement payment following a car accident or another personal injury incident? A sudden inflow of cash might feel like a godsend, but it might just be another stressor. Either way, you may not be sure what to do with the money.
But there are a few options beyond just buying a new flatscreen, some options that you should consider carefully.
Consider Speaking with a Financial Advisor
It’s not every day that someone hands you a sizable settlement sum. For those who have never come into a significant sum of money all at once, the excitement of money and the emotions of the settlement can be a dangerous combination, causing you to make financial decisions that you may regret.
Far and away, the best thing you can do is hire a financial adviser to guide you in making the best choices for your circumstances. This keeps you from making impulsive decisions and helps you manage your money effectively.
Look Into Setting Aside Money for Taxes
While personal injury and physical illness settlements are often excluded from tax deductions, portions of your settlement award could be taxable. It’s crucial to understand what you must pay since failing to pay the correct tax on your settlement could land you in hot water. For this reason, it’s always important to receive guidance from a tax professional before spending any of your settlement money.
Pay Off Debt
Paying off debt is an excellent option for your settlement money. For example, paying off credit card debt, outstanding medical bills, and high-interest loans will put you in a better financial situation.
Create an Emergency Fund
Establishing an emergency fund is a great move to protect yourself against unforeseen circumstances. To plan for such events and reduce the likelihood of having to take on debt in the future, try to save aside enough money to cover your living needs for roughly six months.
Save for Retirement
Use this chance to start saving money for the day when you’re not working anymore. Based on your circumstances, your financial adviser can assist you in selecting the sort of retirement fund that is best for you.
If you plan on saving funds, it’s also essential to consider what kind of estate planning you will need and how your remaining money will be used when you die. An attorney can advise you on how to organize your estate in light of your passing.
If you’ve paid your debts and saved some of your funds, putting your money into investments can be a great way to secure a prosperous future. By investing, you can make your money work for you.
If you’re not ready to invest in someone else’s business, you can invest in your house, your own business, and your education. Enjoy having the freedom to invest in things that are important to you. However, you may want to talk to your financial advisor first to make sure your plans are sound.
Reward Yourself for What You Went Through
Last but not least, set aside some money for yourself. Don’t forget to be wise about how you spend your money — don’t waste it on things you will regret! But always remember to have fun.
Go on that trip you’ve always wanted to go on, buy that expensive purse that has been catching your eye, or maybe upgrade that car that you’ve kept around for the last ten years. You have made it through a complicated situation and deserve to be happy.