Thanks to this blog, I’m learning more and more about the wild wild world of financial products which I previously knew very little about. One of these is the concept of “structured settlement”. A structured settlement is a financial or insurance arrangement in which you get paid over a period of time instead of getting paid as a lump sum…think: “Set for Life” scratch-and-win lottery ticket where you get $1000 a week for the next 25 years vs. winning the lotto max lottery where you get a lump sum instead. Or it would be like regularly harvesting a small money tree plant every year or deciding to harvest a field of money tree plants only once. Because a structured settlement is technically your money, you can decide to sell your structured settlement and cash it out to get a lump sum. The following is a guest post by Jason, from JG Wentworth which pays people cash now for money that was meant to be paid over a long period of time. They are known for their really funny commercial with that catchy tune. Jason gives some tips on how to take the emotion out of structured settlement decisions.
Selling months or years of your structured settlement income into one huge lump-sum payoff doesn’t have to cause stress or anxiety. When mixing money with emotions, a clear head is achieved by having a positive picture as to what a new home, paid off debt or funding another’s education can do to improve your financial life and the loved ones that surround you. Here’s how to feel more secure when selling your structured settlement:
Keep your business cap on. You might have a passion for fashion. Thorough research over what it takes to run a clothing boutique will make you all the more confident about using your lump-sum settlement cash as seed money. Keeping a strong mix of raw data and big dreams close to your heart creates the kind of confidence needed when expanding your capital.
Prioritize your financial needs. If you have accounted for how your direst financial responsibilities – or the bills – will be paid into a workable monthly budget, you can avoid a lot of financial mystery when mobilizing your structured settlement. Your time can then be better spent distributing exactly where and how you’d like your lump-sum payout to be used.
Relief is one emotion you want to feel. If you’re using your structured settlement money to pay off debt, the last thing you want to do is enter into another financial situation that makes you feel helpless. If credit cards were used to make ends meet because you were overburdened with medical bills or college costs, the one emotion you are encouraged to experience when paying them off is relief. Knowing your lump-sum payment for selling a structured settlement takes debt weight off your shoulders.
Unexpected issues cannot derail you. Uncontrollable challenges – from natural disasters to unforeseen college expenses – don’t have to cause roadblocks to your structured settlement investments. If you figure out ahead of time what you will do if things don’t go as planned and have alternative options in place, your inheritance won’t take a financial blow but instead, be a savior to the situation.
Think with wisdom, not with worry. To worry is natural, but there is no need to do too much of it if the company you are working with makes selling your structured settlement easy, stress-free and full of benefits – not constraints. Remind yourself with the above four steps to deal – and not just feel – where this next financial chapter of your life can take you.
Youngandthrifty’s thoughts: One common scenario where a structured settlement would exist is if you (knock on wood) were to be injured in a car accident. The person who hurt you is ordered to pay you for the next 10 years $200 a month for your back pain. You can decide whether you want the $200 a month tax free, or if you want sell it to a company like JG Wentworth for a lump sum instead. The PROS of a structured settlement is that you can get tax free cash every month. It would be a nice cash flow, especially if you’re one to have issues with managing your money. The major CON of a structured settlement is that sometimes you need cash now and not later, because you’re in debt, want to go back to school, or want to put a large down payment on a house. If you’re really good at investing and managing your money, a lump sum would be good for investing. If you decide to sell your settlement, you should be aware that it is adjusted for inflation, federal and state/provincial taxes, etc. In the end, it is your money and you can choose what you want to do with it.
What do you think? Have you ever had a structured settlement? Would you choose to sell it and get a lump sum, or would you want to have regular payments for a period of time?