Taking control of a large sum of money will often seem like a straightforward task. Unfortunately, those that receive a settlement still run the risk of going broke unless some important steps are taken. The following are some financial tips for anyone that has just received—or is preparing to receive—a settlement from a personal injury case.
Find Professional Help
The single most important step for anyone that is about to acquire a large sum of money is to seek out professional help. It may seem as if your family’s advice is sound, but there are quite a few regulations about settlements and some important safety measures to take to ensure that the money lasts for as long as possible.
A good rule to go by is to contact a financial planner or accountant if the lump sum is greater than three or four years’ worth of your salary.
Understand Your Tax Obligations
Almost any time that a person is given a large sum of money, they can assume quite a bit of it will be used to pay taxes. In most instances, settlement money will not be taxed, but there are exceptions to this rule.
According to a financial specialist, some or all of the settlement may be taxed if punitive damages were awarded or if interest is made from the settlement. This is another reason that an accountant can be an invaluable tool in this process.
Continue Working if You Can
Unless your injury makes it absolutely impossible to work, you and the other adults in your household should continue to work as normal, even if your settlement is extremely large. While a large amount of money may make it tempting to retire, there are some drawbacks of not working whatsoever.
Primarily, you may lose other federal benefits if you stop working and do not look for a new job. On average, it will take an investment of $1 million or more to cover a salary of $50,000 per year.
Decide on When and How to Spend
Just as with any other income, a strict budget should be made before any money is spent. This should begin with all mandatory expenses such as rent, car payments, utilities, and medical bills.
If the settlement is large enough, then there is generally not a problem with spending a small amount on luxuries. Most specialists agree that luxury spending is kept well under five percent of the total settlement.
Taking the time to create a financial plan for your settlement could help you maximize your income and ensure that you do not run out of money in the coming years. Good money management and smart spending will help you use your settlement wisely.
Five Practical Money Management Tips
It’s been stated by more than a few finance professionals that those who take control of their money will have a much smoother time in life than those who let their money control them. And this old adage is very true. Of course, for many people, money management is a foreign concept.
But there’s no need to get bogged down with numbers and percentages, as there are many practical ways the average person can successfully manage his or her bankbook. Here’s how.
Understand net worth
Anyone who wants to tackle his or her money problems must first know his or her net worth. This is the total worth minus debt, and having a proper handle on it will better allow a person to manage his or her monthly budget. The most direct and common consequence that comes with not knowing one’s net worth is that it becomes easier to slip further and further into debt.
It may be a no-brainer to suggest that more income means easier money management, but these days there have never been more ways to earn extra cash. Many people supplement their income by blogging or opening an online store.
Cyberspace offers an abundance of opportunities for generating extra income, and taking on a second or even third job will always help alleviate financial strain.
As mentioned above, the market can be intimidating in its uncertainty. But the simple fact of the matter is individuals need to invest a certain portion of their income if they want to maximize wealth. That said, there’s no need to become Gordon Gekko overnight. Individuals can start small with simple mutual funds. These are ideal because people can watch their funds increase in value over time.
Plan for emergencies
It’s not uncommon for an unexpected expense or emergency to occur over time. Unfortunately, things like an unplanned hospital visit or car repair can devastate a person’s personal income – if they aren’t prepared for it.
To that end, it is crucial for people to set aside a certain amount of money in order to cover unforeseen events. Even placing this emergency money in a simple savings account should yield a small interest to make it worthwhile.
Use debit cards and credit cards whenever possible
For the simple reason that credit and debit cards offer itemized bills at the end of each month that show all purchases and expenses. This eliminates the need for complicated money management software and can help streamline a person’s finances.
Also, making regular credit card payments not only boosts personal credit, but it often results in rewards and discounts for the owner.
These are just a few things to keep in mind when sitting down and getting started on a proper money management plan. Above all else, it is important to stay on top of all purchases and keep a close eye on all accounts and statements.
Top Tips For Managing Your Money Appropriately
The economy is getting tougher with each passing day and more often than not, you are likely to meet someone grumbling about the harsh economic times. If you do not meet anyone grumbling, chances are you are the one doing the grumbling.
The joke now is when you try to make your ends meet but somehow, they keep moving. These are just the words people slap on each other to cover the hard truth: you are not a good money manager.
Making money work for you
Whether the economy gets tough or not there are ways you can stay on top of the game. The difference between you and the rich person you covet in your dreams is not the amount of money earned in a month. The difference lies in how you spend the little money that you have.
Money management is the name of the game. The rules of the game are a simple plan before you spend and pay your bills before you spend. If you are tired of living in debt or forever worrying about when your next payday will arrive, find out how to make your money work for you and dig you out of the hole you are in.
- Have goals in sight and do not work for the paycheck
You need to ask yourself every morning when you wake up why you are working. Set definite and measurable goals. Money goals are defined by achievements attained within a given period. Divide goals into long-term and short term then set specific objectives for each of them.
- Get a financial corner
Stop the nasty habit of leaving receipts and financial documents lying all over the house. Make a point of setting aside an area in the house particularly for financial documents. Be it as small such as a drawer on your room or the whole area in the study dedicated to this; ensure you have a financial corner.
- Tally your spending
Before you begin spending on anything, ensure you plan. The first part of the plan includes how much money goes into paying your bills. The second part of the plan has the spending budget. Thinking it through will make you see that some items are just unnecessary.
- Make a mini financial statement
Financial statements are not the reserve of corporations and major companies. You can make one easily for your home. Tallying your spending will make it very easy to list a financial report. You can begin by making one for the month. It can be as simple as money in, money out and money saved. The columns or money out and saved should add up to the money in.
- Spread out your nest
It does not matter how much or how little you are making in your current job. Look for other means to get an income or areas where you can keep your money. Diversification does not have to wait for you to get fired or for the economy to undergo depression. Look for one and start today!
Tips For Managing Your Family’s Finances
As you get older, it is important to learn how to manage your finances effectively. Especially after getting married and having kids, financial management is vital. Poor budgeting can lead to serious financial consequences in the near future and further down the road. Smart financial management, on the other hand, can allow you to have a much easier time providing for your family. Following these steps will allow you and your family to have a more secure financial future.
1. Keep Comprehensive Financial Records
The first step in assessing your family’s financial situation is to keep comprehensive financial records. Your family will have all sorts of expenses, and the money will likely come from multiple places. You may have more than one credit or debit card, and you should also include check payments and any non-wage income you receive.
Organizing these records is important for monitoring your family’s financial performance. To give yourself the easiest time managing your family’s finances, keep all of your expense information in one location, and separate it from other types of records you may be keeping.
It pays to save everything from bank statements to tax returns to receipts for major purchases. There are lots of financial management resources available, so use the tools you have at your disposal.
For monitoring health expenses, for example, you can use smartphone apps like the Family Medical Manager. Other apps and programs will help you track your spending and even monitor your bank accounts.
2. Analyze Your Expenses
Once you have clear records of your expenses, review them to see what exactly your family is spending its money on. You will likely have to compile information from the various financial records you have available, so take some time to process the payments made for various purchases.
It helps to break things down into categories. You might start with discretionary and non-discretionary spending, dividing items that you needed to buy from those that you simply wanted to buy. Creating sub-categories can also help when it comes to targeting decreases in spending in certain areas.
3. Set Financial Goals
Sit down with your spouse and the rest of the family and set some clear financial goals for the family. It is important that these goals are specific, concrete, and attainable, and you should also target certain financial goals for specific dates.
For example, if you find that the family is spending a bit too much on entertainment, you might discuss other forms of entertainment that could save money in the future. Decide on a figure that allows for more savings but that also won’t totally interfere with your family’s way of living.
You can create goals for specific areas of spending and also for the family’s total spending, and setting specific numbers for spending goals is helpful because it adds accountability to the process of improving the family’s finances.
Your financial goals also might come with a major savings target, such as saving up to buy a new car. Consider how much such a purchase would cost the family, and then figure out the amount of time necessary to achieve that savings goal.
4. Monitor Your Progress
Reviewing your financial performance periodically is an important part of the process. As you start to set goals for the family, track how well the family has performed over the period of a few months and analyze ways that you can continue to improve.
As time passes, continue to keep sound financial records and set new goals for the family. Financial management is a continuous process, so it is important to always be active in monitoring the family’s financial activity.