No matter how you got your settlement money managing it properly is important. Here are some tips and tricks on how to make sure that settlement money lasts and that you’re not spending it all in one place!
The first thing that you should figure out is how much of the settlement will be subject to income tax! If you win a settlement from a personal injury trial, there might be an exception. If you won your settlement from a breach of contract, copyright infringement, lost profits back pay or other punitive damages then it will most like be subject to income tax. When you win a large settlement, hire a tax attorney to help you understand what portion of your settlement is taxable and what portion of it might be tax-free.
Find A Good Financial Advisor
When winning a settlement there are a lot of emotions that are involved – relief, excitement, guilt, and happiness. This emotional rollercoaster can lure people into making bad decisions with their money. Finding a good financial planner who specializes in “wealth management” is a good strategy to help you have a long-term financial plan. They can also help you select where to invest your money and if that splurge purchase is a good idea!
Pay Off Debt But Also Save
When we said don’t spend all your money in one place, we meant it. As excited as it would be to pay off all your debt, having some debt is a good thing especially if you need a mortgage or a car loan in the future. We recommend paying off any high-interest loans, credit cards, and other medical expenses. We recommend saving at least 6 months of living expenses in a high yield savings account to help you stay out of debt in the future. If you have money to spare then definitely consider paying off your mortgage if applicable. Then discuss the remaining assets with an estate planning attorney so you know where your future assets will go in the event that you pass.