I first need to preface this article by saying that I am a personal injury attorney, not a financial adviser. My professional expertise lies in helping you win your case and receive the largest settlement that is possible. However, as an attorney with years of experience and who takes a personal interest in his clients, both before and after their cases are closed, I have seen the many mistakes that can be made when someone suddenly comes into a lot of cash.
It is disturbing to me the number of times that I have encountered former clients at rallies and poker runs, knowing that they had received nice settlements, and finding they are back to living hand to mouth.
Because of this I would like to offer these few common since, pieces of advice on what you should do with the money, after you successfully win a lawsuit.
Don’t Go Crazy
It can be overwhelming to suddenly see large numbers on your bank account statement. You have to remember that in the majority of cases this is a one time deal. Even though it may seem like you are suddenly rich, remember that this money, once spent, is gone. Warren Buffett said it better than I ever can.
“If you buy things you don’t need, you will soon be selling things that you do.”
Don’t make down payments and weigh yourself down with more debt. Remember the money will eventually run out if you don’t play it smart.
Clear Your Debt
It is much easier to make ends meet if you don’t have people continually cutting pieces out of your rope. Begin with your medical bills. Remember, that is what part of the settlement was meant for and medical bills can haunt you for life.
Next, look at all your bills and pay off your highest interest debts first. These will most likely be credit cards or high interest auto loans. Over the long term this will save you a fortune if you can use restraint and not go back into debt. My advice cut up those credit cards.
Buy What You Need
This won’t apply to everyone, but will too many. A great number of my clients have permanent injuries that require some form adjustment to their lifestyle. If you need modifications made to your home or auto now is the time to have them done while you can pay cash for them and stay out of debt.
Invest in Yourself
Use your money to go back to school and advance your education or learn a new skill that will empower you in the future. It was once said that “the only two things no one can take away from you are what you know and your good name.”
Even if you have suffered a permanent injury that precludes you from performing your previous work, you can still be productive by learning a new skill that fits your new situation.
Protect Your Money
Place your new found wealth into an annuity or accept a structured settlement. Both are good ways to assure yourself of some income for years to come and help you avoid the spending bug. Please note though, if you choose one of these options that there are companies that will try to buy your investment from you. Stay away from them. Remember, they wouldn’t be trying to sell you if they weren’t going to make a profit. Why give them YOUR MONEY?
Following the same theme an annuity or structured settlement will preclude you from being able to loan (GIVE) money to all the new found friends and long lost relatives who will suddenly appear after your settlement.
It is a terrible thing to be injured in an accident and then have to suffer through a lawsuit without having to look back and ask yourself “Where did the money go?” Play it smart. Handle your settlement properly. Enjoy your life and hopefully, your newfound financial freedom too.