What Should I Do With My Personal Injury Settlement Money?
February 9, 2024 | Sagi Shaked | Personal Injury
A personal injury settlement can take a while to recover, especially if it’s for a substantial amount. But once you finally get ahold of your settlement money, you might be compelled to think, “I won a settlement — now what?” Knowing what to do with settlement money, while exciting, is also something that requires a lot of thought.
Before you start spending, it’s wise to create a financial plan that can help ensure your settlement stretches for as long as you need it to.
How To Protect Your Settlement Money
Having finally received your personal injury settlement, it’s likely that you have medical bills and other injury costs that need to be paid off. If your injuries have left you unable to work, you may have also piled up costs for things you’ve been putting off, like much-needed home repairs.
It makes sense that once your settlement money hits your bank account, you’d be more than ready to start spending it, but spending without planning can be a costly mistake.
With that said, some of the smartest areas to prioritize after personal injury compensation comes through include the following:
- Paying off debts related to your injury
- Getting caught up on bills and living expenses
- Understanding and paying off any tax obligations
- Creating a will
- Creating a long-term plan for how you’ll use the rest of the money
The aftermath of a personal injury is often a high-stress time, one full of medical treatments, recovery, legal proceedings, and financial stress, so it’s natural to want to cut loose by booking a vacation or indulging in some shopping. Too much spending at once, though, can cause your settlement money to run dry long before you’re ready.
Common Settlement Spending Mistakes
How you use your settlement depends on many factors; if you’re able to return to work and can rely on continued income, for instance, you might have more flexibility with how you use your settlement.
That said, many personal injury settlement recipients are left with car accident injuries or workplace injuries that make a return to work impossible. In these circumstances, it’s essential to plan out how you can live comfortably off your settlement money for years to come.
All too often, personal injury lawyers see clients left without the ability to pay for long-term living expenses because they don’t consider the question of what to do with their settlement money.
Some other common mistakes settlement recipients often make include the following:
- Neglecting to pay off medical bills and other debts
- Making large purchases, like a new home or luxury vehicle
- Raising their standard of living to an unsustainable point
- Making poor investments
Setting up a spending plan is the best way to ensure your settlement sets you up for long-term financial success.
Setting Up a Settlement Plan for Success
A settlement plan is similar to a budget, but specifically with regard to your long-term expenses and how your personal injury settlement will pay for them. One of the most basic decisions to make is whether you’ll receive the settlement as a lump sum or split into payments over time, also called a structured settlement.
Your goals and personal spending habits are two factors that can help you identify which payment structure is right for you. Personal factors like your age, health, and settlement amount also need to be considered when making your decision.
As such, it’s best to sit down with a lawyer and identify how to protect settlement money so you get the most out of it. Planning and budgeting are the best strategies for ensuring your settlement covers your expenses for years to come.