What now? Is a good question to be asking because many people, after settling their personal injury claim, never ask that question and will end up wasting a valuable opportunity. Long ago, I was told at least 60% of the people who receive a personal injury settlement will have no money left after just 14 months. True or false? I don't know but I suspect there is a lot of truth to that statement. So what should you do after you settle your personal injury claim?
Don't settle and start to spend. That's rule #1! Remember just having money does not make you special. In fact it can make you really really stupid. Thinking you're special and powerful just because you have a little bit of money is one example of being in the mood to do something really dumb.
You settle your case, are given some money and end up having no plan and then wasting the opportunity to make your life a better one.
What to expect – "Everything I’ve always wanted I now need." This is what most people will think. So here is what to do to avoid running out and buying everything you've always wanted, but don't need.
- Immediately buy a 6 month certificate of deposit and learn to do nothing rash while learning about how to successfully invest the little bit of money you have to create some sort of future income stream.
- Wait, wait and wait more. Do not be in a rush to do anything involving spending the money.
- Then, teach yourself to make better financial decisions.
- Learn to think long term. (Long term investments include things like annuities, stocks, bonds and the right real estate.)
- And what about after I invest? Buy and then learn to fish; because fishing teaches patience and you will need patience to do this right.
- Learn not to react over short term setbacks. Learn to have patience.
- Learn to say no. There is no such thing as a "loan" to a relative or friend. It's a grant. So learn this lesson: you will never get back any money you "lend". So learn to say "NO".
- Start slow and be smart.
Real Estate – Real estate, the right real estate can be a good investment, because it's one of the only investments you can leverage with someone elses money. Banks will lend money to purchase the rigth piece of real estate. If you buy a duplex, a four-plex or more ti can turn into one source of retirement income. Why a duplex and not a single family home? Because owning a duplex is a business with another family that helps you create wealth through month-to-month equity building. Their rent check is income to your family. It's a return on your investment. A mortgage is sort of like a forced savings account that over time will create borrowing power to buy a second duplex. Tools that you buy to maintain your property are another way to earn more money and will be tax deductible allowing you an advantage to purchase tools at a discount to ordinary retail shoppers. The idea is to create an income stream eventually becoming a system of financial independence freeing you of your past mistakes.
What are some of the advantages of owning real estate?
- Mortgage buy-down
- Cash flow
- Mortgage interest is a tax deduction saving you from the tax man
- Depreciation is another form of tax deduction
- Tools can be written off and depreciated pretax
- Supplies can be written off pretax
- You can hire your children to do work and write it off
- Building of equity as the mortgage is paid down
- Borrowing power increases as the equity builds allowing you to borrow and buy more property
- The tools you buy (including a truck) will enable you to earn money on top of what the duplex is earning