A personal injury incurred through no fault of your own can be a truly life changing event. If the injury is lifelong then you will deal with the consequences forever. However, in some cases the change can come in the form of a windfall of money in a settlement.
This money can be used to help you feel less distress over the injury and can end up helping you live your best life despite the fact that you were in a needless accident. If you have a personal injury lawyer working in your corner then you could end up with a considerable sum of money.
In this article, we will go over what you should do when you get a sizable settlement to avoid making financial mistakes.
Don’t Do Anything
The most important thing to do right away is nothing. That’s right, you shouldn’t do anything just yet with the money. Hopefully, you have been thinking of how to be responsible with the money before the settlement hit your bank account.
Either way, you need to sit with the money without touching it while it settles in and you can avoid making any emotional spending decisions. This will help you avoid spending the money in a way that you’ll later regret.
Use the time to create a will so that if something were to happen to you then your loved ones won’t be burdened by trying to figure out how to deal with your money.
Figure Out Your Tax Situation
You don’t actually have all of the money that you’ve gotten from your settlement just yet. It may seem that way, but don’t forget that a sizable chunk of that money will need to be left aside to pay for your taxes.
Now, sometimes certain settlements are tax free. Even portions of the settlement may be tax free while other parts of it are taxed. It’s up to you to figure out how and how much you will be taxed on the money so you don’t get hit with a tax bill later on and don’t have the money to pay it.
Prioritize Your Finances
Surely you have some bills that have accumulated especially if your injury kept you out of work. Take some time to figure out which bills need to be paid right away and take care of them.
Then, think about some of the upcoming expenses you may experience later so you can set some money aside to pay for them when they do come. You may even have a reduction in income and need to make sure that your settlement lasts so you can continue to enjoy the same standard of living you previously had.
Make Some Investments
The best thing you can do with this money is to have the money work for you. If you make some low risk investments like index funds then you can make sure that your money lasts a lot longer.