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3 Things To Do With Your Money After Receiving A Settlement

At some point in your life, you may receive a legal settlement that brings a windfall of money to you. And while you might be excited about the prospect of being compensated for whatever misfortune befalls you, it’s important that you make the right choices with this influx of money so you don’t wind up losing it or wasting it.

So whether you’re getting paid for a settlement from a car accident, personal injury claim, or some other type of lawsuit, here are three things you should consider doing with that money once you’ve started the settlement process. 

Decide How You Want To Receive The Money From The Settlement

When you’re getting a legal settlement paid out to you, there are generally two ways in which the payments can be made: either as a lump sum or in a structured settlement. The payment structure you’ll want to receive will depend on a few things.

According to AllLaw.com, it’s usually a good idea to just get everything in a lump sum if you’re getting paid a smaller amount for your settlement. Anything under about $150,000 is usually considered to be a smaller amount. However, if you’re getting a larger payout and are worried about your ability to manage the money on your own, using a structured settlement could help ensure that you don’t spend all the money at one time. 

Because there are different pros and cons for each option, make sure you consider everything carefully before making your final decision. 

Learn About Your Tax Responsibility Before Settling

Another reason someone might choose a structured settlement for their settlement payout is because you might have to pay less taxes when you go this way. To determine if this would be the case for you, it’s wise to learn about your potential tax responsibilities before you settle.

Andrea Karim, a contributor to WiseBread.com, shares that settlements paid out for personal injury or illnesses aren’t usually taxed in the same ways. But if your settlement is coming to you for some other purpose, you should seriously consider speaking with a tax professional to ensure that you follow the law for what tax you owe on your payout. 

Get Help From A Financial Professional

In addition to speaking to a professional about the tax implications for your settlement, Allan Liwanag, a contributor to The Practical Saver, recommends that you also speak with a financial professional about the smartest financial moves to make with the money you’ve just received.

For some people, paying off debt might be the best option for their settlement money. For others, investing in various ways could prove most fruitful. With the help of a financial professional, you’ll be able to see and understand just what will be best for you and your money. 

If you’re about to receive some money from a legal settlement, consider using the tips mentioned above to make the most of this money.