When you’re granted an out of court settlement you have a lot of options of how to manage your money. Here are smart things to do with your settlement money.
When you’re just being granted a settlement or you’re anticipating a settlement offer in the coming weeks, it’s important to plan out how you will manage this money. It’s all too common for settlement receivers to accidentally blow through the entire winnings in less than five years – leaving them unable to work in many cases and unable to support themselves at all. Here are some smart things to do with your settlement money.
Create a budget
If you’re a master budgeter or have experience managing large sums of money, you may be fine to do this on your own. If you’re not the best budgeter, another option is to hire a financial advisor to help guide you on where, how, and when to spend your newfound cash. If you’re someone who might not stick to your advisor’s plan or tend to spend frivolously, you should talk to your lawyer before accepting a settlement about the benefits of a structured settlement versus a lump sum payout.
Read up on tax regulations
Your settlement may be subject to certain taxes. Even if some parts of your money are tax-free, other parts could be taxable. It’s important to talk to an accountant that specializes in settlement situations about what the tax implications of your settlement are and how to best prepare for those.
Pay off debt
If you have extra money after budgeting for your day-to-day expenses, a great way to spend it is by paying down debts. Pay off high interest loans, credit cards, medical bills, or any other debt you would otherwise have trouble getting out of.
Save! This is the smartest thing you can do with your settlement money and the step most people fail to do. Put money into your retirement fund or start one if you don’t already have one! Additionally, putting money away for your children’s education funds, or starting an emergency fund with at least enough money to cover six months of living expenses are beneficial ways to save
Use left over money to invest in your financial future. Look into starting a business, investing in an existing one, or even look into real estate acquisition. Investing can ensure your money goes to creating a stable source of income for years to come, so that when the settlement money does eventually run out, you’re still able to live comfortably and keep growing your investments.