It’s so easy these days to simply charge something to your card and worry about the costs later. It’s alarming how fast that can get out of control — many people can be shocked at the amount listed on their credit card bill if they weren’t accounting for what they charged as they went. Indeed, it’s common for consumers to underestimate or not report a lower of amount of debt by a large margin. In 2013, the credit card debt that was reported was over 155% more than what borrowers reported. We pay over $6,500 in interest every year and with the average household having over $15,000 in credit card debt and over $125,000 in overall debt, that’s not surprising.
Perhaps part of the credit card mentality is because over three quarters of American families live paycheck to paycheck and unexpected emergencies or other occasions make it necessary to live outside their means. So what happens when you come into a large amount of money? It would be very easy to simply squander it all or pay off debts without investing a single penny. You’ll be faced with a choice: take payments in line with structured settlements or take a lump sum payment. Another option is to also sell your structured settlements for cash. What’s the best choice for you?
What Are Structured Settlements and What’s a Lump Sum Payment?
Structured settlements is a type of financial arrangement, usually directed by legal action. Insurance companies often pay them out in personal injury claims. With structured settlements, you get annuity payments instead of a lump sum payment. You can often get tax benefits if you opt for this choice and the payer ends up saving some money in the long run. Typically, the individual receives a part of the money when the claim is decided and then decides on periodic fixed payments. They can decide when they get paid and how much. So, for example, an individual might decide on a payment of $10,000 every five years, instead of receiving it all at once.
A lump sum payment is much more simple. The recipient receives the total amount they’re due at once, instead of receiving over a longer period of time.
What are the Benefits of Selling a Structured Settlement?
If you’re hard up for cash or money now and can’t afford to wait a certain amount of money before receiving the money you’re due, selling a structured settlement for cash might be a good option for you to look into. There are some companies who will purchase structured settlements and then give you cash for them. You may not get all the money that you would receive if you waited the longer amount of time, but you’ll have upfront cash to dispense to various bills, debts, or other endeavors.
If you have outstanding debts or bills that need to be paid immediately, selling your settlement for cash can be a practical option to help take some of that pressure off. With that much money at once, you could finally purchase a better home, send your child to a good college, or tackle your financial situation with a clean slate.
What are the Benefits for Keeping a Structured Settlement?
If you’re worried about squandering your newfound money, a structured settlement can help you budget better by only allowing you a portion of the money at one time. You won’t risk spending a large amount of money all at once on trivial items that you don’t really need. Hiring a financial adviser at this point might also be a good idea — he or she can help direct you to the best investment and use of the money you receive over the lifespan of the settlement. With any luck, that kind of structure will let you pay off any outstanding debts, live comfortably, and even help you make your money grow in the long run!
Depending on what your situation is, keeping your structured settlement or opting for a lump sum payout may be better for you. A financial adviser is always a good sounding board for this kind of advice.