10 Smart Moves To Do With Your Settlement Money
This “ 10 Smart Moves To Do With Your Settlement Money” post describes some suggestions you can do if ever you receive structured settlements, cash settlements, bonuses, or others that don’t happen all the time. This post contains affiliate links/ads. See disclosure policy.
Just in case you receive a financial windfall, do you know what you should do with you money? Before you answer the question, let me tell you what a financial windfall is just to avoid confusion.
A financial windfall is quite often a life-changing event, that is, you’ll receive a big amount of money either from structured settlements like car accidents and mesothelioma claims, inheritance, bonus for accepting a new job, or any other settlement payments.
Now, back to the question… Do you know what to do with the money? If you do, then, that’s good but you still need to sit down and carefully think about what you are going to do with it before making any decisions. Remember, one or a series of even small bad moves can drastically affect you personally, emotionally, and financially.
There are people who won big-time through the lottery only to find themselves losing everything and becoming more indebted in just a couple of years. Please don’t think that what happened to them will never happen you, if you ever be in this position, because there’s always a possibility that it would happen. Again, never say never.
Here are some ways you can do to avoid being one of those people who earned a huge sum of structured settlements or any form of cash settlements and end up in a worse position.
Know The Tax Consequences
Here are some situations where you can get a huge amount of money: (1) You hired the top personal injury attorneys for your legal case and won a hefty amount of structured settlements; (2) You receive a big bonus from a big company for accepting a job offer; (3) You receive an inheritance due to death in the family or something like that, and; (4) You won the lottery.
When you are in situations like the ones stated above, it is imperative that you understand the tax implications of receiving a windfall. Some settlements may be tax-exempted (as in the cases of some mesothelioma claims and accident and injury claims) but some are not (as in the cases of inheritance and lottery claims).
Your settlement may be subject to taxes. It is best to seek help with professionals such as CPAs and tax attorneys to make sure you pay the necessary taxes. If you neglect paying the taxes, you are looking at higher tax liabilities due to penalty and interest.
Create a plan
Before you even make any moves that involve using your money, make sure that you create or have a plan.
Ask yourself what you want to do with the money. Do you want to buy a house or donate money to charity? Do you want to fund your retirement or spend years on vacation? Whatever your desire is, you always need to have a plan and, even better, payday loans Colorado a backup plan.
Like what I always say, you don’t want to go to a battle without a plan. More likely than not, you will lose or get wounded. The same analogy applies to planning on how to use your money.
Hire a professional
If you receive a huge cash settlement, you should consider hiring a financial professional. Avoid doing all the investing and saving all by yourself. You may be saving professional fees by not hiring a professional but you’ll have a greater chance of making investment and saving mistakes along the way.