SavingsTalk.com

titan22

Every once in while someone has the tragedy of losing someone close to them. Fortunately they have some form of life insurance that provides them some sort of cash settlement. Unfortunately, people will go out and make their own decision on what they should do with the money before going to see a professional. I'm going to try to explain good and bad thoughts of what you should do with your money.

Should I pay off my school loans, mortgage, or low interest auto loan?

No, you should not pay off low interest loans. First, build your credit score. Use the money to pay them off monthly and improve your credit rating.

The bigger reason to not pay these off is because you can invest that money at a low risk rate and return 8-12% still being reasonably conservative. Imagine that interest that you get from your investments paying off your bills. You don't have to do anything and your bills are all taken care of. The income that you already get from working can go towards a retirement plan or some sort of other enjoyable investment. In short, let your money work for you. If you pay off low interest debt, you are losing money.

Should I invest in High Risk stocks or funds?

NO! You sacrificed a family member to get this money. Do you really want to see it just disappear. I totally understand that it is money you didn't expect to have, but don't let go out the window. I would rather have that close family member, but when you have the money, at least you can do something good with the memories and the money they left for you.

Should I Start a business?

Do you have any business operating experience? Usually the client doesn't. So i have to say no. It is another form of a risky investment. I wouldn't want to fail at something with money from my family. It would be a double emotional whammy.

Should I Buy a New Car, House, and Go on vacation?

Well, it's better than spending it on drugs and partying. I still don't recommend this. Yes, you have something to show for it and you get your life settled. But I still have to recommend investing wisely and using the money for interest added to current income to get a loan and mortgage for the necessities of life. If you want a house, get a mortgage, build credit and make monthly payments. It's more secure, it's safer and you can keep your money growing.

Well What CAN I do with it???

First, I would find a legal financial advisor or planner. Find someone you trust and ask them who they work with and how they feel with them. Most people are happy to give a referral of someone who has helped them. Most Planners and Advisors work off of referrals anyways.

Second, i would pay off any credit card or car loan where the interest is over 10%. I still don't understand why people are taking these credit opportunities. I understand people need cars, but not at 20%. Pay off medical bills also.

Last, I would put some into an emergency savings. don't touch it. Leave it there for an emergency or if you need car repairs or a water heater goes out. If you have children, start a college fund for them. Tuition is going up almost 6% every year.

Be very conservative with Insurance money. It isn't "FREE" money by any means so don't treat it like it is. Take the advice of the professional that is helping you.