My personal injury case just settled and I have $45,000 after paying my medical bills and my lawyers. I have never had this much money in my life. What do I do with it?
You are not seeking legal advice here – this is financial advice. However, many of our clients have asked this question over the years and I will share some general thoughts.
First, you should set aside some money for what many people call an “emergency fund.” The emergency fund should be three or, even better, six months of the money that you need to operate your household. It should be kept in a savings account or a money market account and should only be used for emergencies – an unexpected car repair or medical bill or to meet normal expenses if you lose your job. You will gain an unbelievable peace of mind by having this amount of money in the bank.
Second, you need to consider paying off any credit card, automobile, or other consumer debt you have. The interest rate on this debt is high. Eliminating this debt will increase your monthly cash flow (because you won’t be making those monthly payments) and you can use this “extra” money to pay off your other debt.
At $45,000 you won’t probably have much money left. But you will gain a lot of peace of mind and help you get started on the path of financial independence.
Finally, I recommend that you read Dave Ramsey’s Financial Peace book and consider attending one of his financial planning courses. These classes have a very conservative approach to money management, but most of us can benefit by the lessons taught in Dave’s books and his courses.