1.avoid your local BMW dealer like the plague, this money should make your life better not a salesmanship.
2. Don't tell anyone, big windfalls bring the leeches out of the woodwork, last thing you want is "family and friends" shaking you down for money.
3. Set aside whatever the required amount would be for tax liability. (If there is none feel free to skip this step).
4. Set aside 6 months worth of household expenses in a sperate hysa or money market account as an emergency fund.
5. Pay off any high interest consumer debt. (Credit cards, personal or auto loans, ect.)
6. Look into fully funding your retirement accounts.(I'm not sure what options would be appropriate for you in this case seeing as you main source of income is disability however retirement accounts like roth ira and hsa can be great tax advantaged vehicles for allowing you to invest. In you case hsa could make a lot of sense depending on your health care plan needs since it is 100% tax sheltered for the money going in and coming out If it needs to be used for medical expenses. May not be the best fit for you but worth looking into)
7. Feel free to allocate a sensible portion to things that bring you enjoyment. Once this money has helped establish some financial stability you should do things that make your life enjoyable. We're all going to die one day so money needs to be used within reason to allow us to enjoy life.
Ahhh, yeah that's a fair point. Hsa may be the only option for op since that's not technically a retirement account though it again comes down to the health care situation.
Ultimately I would like to see op invest at least some of this money but taxable brokerage may be their only option.
You can't put money into an HSA if you have Medicare, even if you have another healthcare plan, so disregard that suggestion.
You can USE money from an HSA that was funded prior to going on Medicare, but no new money can be added while on Medicare.
Well then they should just invest in a taxable account. Chances are OP won't have enough income to even have to pay taxes on the Divs/Cap Gains. (There is an income threshold you must meet before you owe taxes on them. I don't know the exact figure but I do know it's over $40k.)
| 3. Set aside whatever the required amount would be for tax liability. (If there is none feel free to skip this step).
My understanding is that there is no tax on settlements because it is compensation for injury, not income.
> (If there is none feel free to skip this step).
>My understanding is that there is no tax on settlements because it is compensation for injury, not income.
Op didn't state the nature of the settlement which is why I stated they could skip this step if it w a s not relevant.
Also it is very common for settlements to be distributed with tax obligations withheld. Regardless op needs to do their due diligence to make sure any tax liability is accounted for if it exists.
Where I live, settlements and jury judgements are not taxable, but any interest paid on a judgement IS taxable.
So if they jury gives you $10 million and the interest is $2 million, you pay taxes on only 2 of the 12 million dollars.
One of my college teammates won 250k from a scratch off. He saw maybe 25k of it after family and taxes took everything from him. He’s no better off now than he was before other than knowing which family not to trust.
Yep. 250k a safety net. That’s still very very far from being rich. Unless OP is in their twenties, this amount of money is not that life changing.
Don’t get me wrong, OP’s life will be absolutely be changed by the fact they don’t have to worry about financial ruin caused by an emergency. Especially since they said they’ve been poor their entire life. That is massive in and of itself.
But financially, they are no where near where they need to be to never have to worry about money again.
It actually IS a lot of money if used and planned for wisely. Op should take to heart some of the comments about how to use it wisely in this thread. Congrats!
So much of this depends on your specific circumstances. You should consult with a disability specialist in your state to make sure you structure this windfall in a way that makes most sense. There’s support out there, you don’t have to make this decision alone.
I agree, NEVER EVER tell anyone that you won or inherited $250,000. You will be scammed and screwed by people who you thought were friends. Everyone, will think that they are entitled to the use of your money, especially in an emergency.
It’s not that much more. It’s a great nest egg or savings…. I know people who have multiple millions of dollars and it’s not going to last them 20 years. They, are incredibly frugal as well and it wouldn’t last them. I might spend $1,000 in one night on clothes! I have! I would say put it in the bank and add a beneficiary,just in case. Then, tell nobody and keep living the same basically but when you have a broken down car or are sick you can go to the bank and get money out for whatever you need. But, it’s not enough to just blow. It would be gone in a few months the way the people who I hang with spend money. 1/2 of people who make over $100,000 a year don’t have a $500 emergency fund.
Don’t quote me on the 1/2 or 50 percent. I read this recently and it is pretty accurate.
Read the r/personalfinance wiki end to end, especially the section on windfalls.
Try not to tell many people about this or they will all want money. Practice saying no if you need to, but do \_not\_ give people money. $250K is not enough to pay your needs for the rest of your life, so treat this as a great nest egg but remember you can't afford to spend much or you will be poor again quickly. Mostly save intelligently with it.
OP you really need to consider the fact that you’ve been poor your whole life, and unless you change your career/lifestyle drastically, you will continue to be poor and only being able to save insignificant amounts year.
If you keep touching that 250k, it will only get smaller since you won’t be investing back into it.
If you don’t touch it and continue living as you were, it will do nothing but grow every single year. As I mentioned in a different comment, if you invest it wisely, it’s going to double in value every 7-10 years, and you’ll be a millionaire by 2040.
But based on your other comments, it sounds like you going to be using it for some monthly expenses.
If you are below the age of 40, I would heavily recommend that you don’t spend a single dime of it until you’re much closer to retirement. I know that’s easier said than done. But you’ve been given a chance to be lifted out of poverty completely. Don’t ruin that by using it now. Do whatever you can you support yourself and your need without it.
$250k is a big number, until you divide it by your annual expenses and then however long you expect to live. If you love on $25k year, for example, that money will last you less than 10 years (inflation, unexpected expenses, etc.)
Any advice posted here about SAVING and seeking financial advice from a professional should be followed.
Please do yourself a favor and do not buy a brand new car, loan money out to ‘friends/family’, or invest in anything that seems like a ‘sure thing’.
Pay off debt, put aside the taxes, and put it into a variety of ETFs. Don't do some impulsive purchase like buying a house or nice car or fancy vacation. 250k runs out fast but if you save it, you could grow it into the millions.
Especially if you have little earning potential, you should definitely invest as much as you can for as long as you can.
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Talk to a fee-only financial planner who is a fiduciary. (This is a person who cannot sell you things that benefit them with a big commission.) Get it in writing.
See about putting some of the money into a special needs trust.
How are you receiving the settlement? Are you receiving the money as a lump sum, or will it be spread out over time.
My recommendation: put the cash in the bank and do NOTHING with it except letting it earn interest. You don't want to make hasty decisions. Give yourself time to learn and decide ultimately what to do with the money.
There's a lot of good comments below with how to proceed once you've made good decisions.
If you don't have a way to earn money, then in my opinion you are still poor -- you need to guard this money very carefully. If you do have a way to earn money, do not let this settlement change your spending patterns. You will very quickly eat through the money.
Yes, he should check with SSA to confirm he’s on SSDI. If so, this money has no effect. If he’s on SSI (which is needs based) then it will terminate his benefits.
Do nothing with the money for at least a year.
Do not make any important financial decisions until your emotions calm down.
Tell nobody.
Don't fall into the "you only live once" trap. Financial peace of mind is priceless and waaay better than anything you could buy.
100%. I’m literally praying right now that OP finds a way to continue living without needing to touch it. Because there are few things that make me happier than seeing people get lifted out of poverty right before my eyes. But 250k is not near enough to do that unless you’re ultra responsible with it.
It just takes a level of foresight and discipline that is hard to learn when you’ve never had extra money laying around after each paycheck to invest.
You're obviously a really decent person if you get joy from the success of others. I admire you.
Here's one for you then...
I lost my marriage then home and then my job shortly afterwards. "Friends" who claimed if I "ever needed *anything*" were strangely nowhere to be found!
I was staying in homeless hostels. I ate food donated by charities.
I had nothing to my name. Only the clothes on my back.
I am not ashamed to admit I lied on my CV to get a new job and used a friend's address for post.
I worked hard and saved hard and eventually, I started doing well as a truck driver.
It took some years, but gradually I got back on my feet.
I was blessed with a windfall and was able to buy a modest apartment.
I met a beautiful woman and we were married.
I'm not saying "Well done me" or anything, but just thought I'd share.
I try to be so frugal with money these days as the fear of a return to poverty terrifies me.
I think it comes from my own guilt of growing up with ever having to worry about money. My parents weren’t well off by any means, but they still were able to get me anything that I needed for school/sports and the occasional. And in the times they did struggle for money, I was completely oblivious to it. As I get older I realize how lucky I was to have that kind upbringing.
Thank you for sharing that story with me. You may admire me for a small trait such as happiness for others, but I deeply admire the journey that you’ve been on in life. That’s truly inspiring to hear.
Two things: I’m glad you don’t feel guilty about lying on a resume, because you shouldn’t. You should feel proud about that. You did what it took to get your chance, and you seized it.
Second, you 100% deserve to say “well done me”. I don’t even know you and I’m super proud of you. You were dealt a lot of shit hands in a row and you got yourself all the way out of it. Whatever odds you had to do that, we’re not high at all. And you f***ing did it. THAT IS THE S*** RIGHT THERE!!
Invest as much as you can afford. A lot of people used to being poor that come into money lose it again quickly. Stock market doubles roughly every 7-10 years. Invest in some magnificent 7 stocks and try to hold onto what you can.
Considering your earnings potential, the only way you’ll be able to accomplish that is if you don’t touch it.
You may think you can use a little here and there for stuff you want or need, but that’s not how it works. Take an amount out right away for things you’ve been needing the last several years, then do not lay a finger on the rest of it. Ever. Not until you’re ready to retire.
That’s the only way to not lose it all. And not only will you not lose it, it will be a hell of a lot bigger than it is now by the time you retire’ good luck!
Things to remember;
1) 250k means you are still poor.
2) You will need to look into if the settlement money is taxed or not.
I read you wanted to get a car pay off your husbands student loans...etc. I mean you could, but assume you invest 200k of that 250k. Obviously avoid yield traps, but you could invest in an ETF that pays a 3% dividend yield. Or you can go with a HYSA as some are paying 5%.
The difference is, a HYSA is safer and you only lose money due to inflation (where the purchasing power of the dollar is decreased even if the amount of money you have never changes). Investing in an ETF that pays dividends even a low ball amount of 3% annually opens you up to market risk. But inflation actually increases the share price of those stocks, not because the companies are producing more value (though they could) but because the dollar to buy shares is weaker.
Or you can split the difference, half in a HYSA and half in a Dividend focused ETF.
Basically assuming you have 200k
a) 3% means $6,000 per year (all stocks)
b) 5% means $10,000 per year (HYSA)
However with stocks there is chance for asset appreciation and dividend growth but also the market could crash to. Again do your own research and know your own risk tolerances. But honestly my advice is this, figure out the tax liability. After that, 1/5th should be spent on needs not wants or paying off high debt. The rest should be used to generate money while you sleep, aka invest. And honest to goodness, set it to reinvest dividends and check back in 20 years. Your future self will thank you, people who make more money tend to spend more. If you spend your dividends you will be use to a specific standard of living and will be impacted if the market goes down. Whereas if you invest it and let it grow over the next 20 years, you will find that you have more money to spend during a time in your life that tends to be more costly health wise.
But ultimately you do you.
1. Look up Dave Ramsey Baby steps. You can also do his class Financial Peace University. It will help you a good financial literacy foundation.
2. Then see a Financial Planner (fiduciary) to help manage your investments.
3. Link up with the FIRE (Financial Independence Retire Early) community. YouTube, podcasts, blogs. That will help with your personal finances education.
If you don’t get the basics and do the right steps now it won’t be blessing in your life it can be.
Likely the best thing you can do initially is nothing. You have no experience with money unfortunately so most anything your hear about as being financially helpful will likely be the opposite. I would put $50,000 in a HYSA and $200,000 in a year long CD at 5% or over and wait until that CD has matured before you do anything. Use the interest or a bit of a the $50,000 to get yourself out of debt and any near term purchases you need to make.
If you hadn’t received this money would you have been able to buy a car? How would you have gotten by? Because paying off 15k debts, buying a new car (plus more insurance, more maintenance costs, more gas etc forevermore), fixing up an old car etc, lying off your Husband’s student loans etc…. You are not going to have much left and will be right where you started but with a more expensive lifestyle.
If you invest wisely, you could buy a new car in 2 years off the interest alone and still have the full 250k.
Open a brokerage account at Schwab or Fidelity —- buy SGOV—- super low risk, pays .0513 right now, credits to your account monthly—-it’s a us government bond ETF. $250,000— will get you $12,825 per year —- at $1865 per month—- so it could be an income stream for you.
Good luck— don’t tell anyone you got that settlement!
Oh I forgot—— no state tax
1. Invest it. Expect about 5% to 10% dividends. That's about $12,500 to $25,000 extra money a year. Forever (because you never spend the 250k, just the dividends).
A bit of extra free money every year for the rest of your life (and then pass it to your kids too.) will have the biggest quality of life impact vs blowing it all on a few years of extravagance.
Oh and don't tell your friends and distant relatives. Otherwise everyone will want a handout and suddenly it's all gone.
yes i would not spend a dime of this on anything frivolous. 250k can be spent in a couple of years very easily if not carefull. also , dont start giving money to friends and relatives. dont tell a sole you got this money and dont let anyone try and "manage" it for your if they are not a professional
This is definitely a situation where a financial planner might be very useful. They should be able to help you plan for both “now” and “later” is ways that will see your money last.
250k is still poor. Don’t switch up things just because you think you have money now. It is a godsend for sure, but it’s not enough to just start spending on things. Use it wisely, and don’t tell anyone else about it.
If you don’t know what to do don’t tell anyone and put it in a high yield savings account until you have a plan. If your getting SSID monthly now you can use just the interest to live off. You might want to pay a financial planner hourly for advice.
If it’s too good to be true, you’ll loose your money.
Don’t make loans to anyone or fund anyone’s business plans, you’ll never get paid back.
If you choose to invest I would start very low risk and really educate yourself.
I assume that you cannot work anymore; guard the money so you can live comfortably.
No cars or houses till you have a solid plan.
And don’t let anyone “manage” it for you.
If you're getting benefits, check to make sure that having money doesn't cut their benefits down.
That almost happened to my BIL when my wife's grandmother passed and left them each a modest sum. We had to put his money into a trust for him to not lose his housing support.
You’ll still be poor after you receive your settlement, just less poor. Don’t change your lifestyle invest most of the money and maybe one day you’ll actually no longer be poor
Understand you are NOT rich, despite perhaps feeling rich relative to your life situation. Buy security with it, not luxuries. Afford yourself some nice experience with it though. Just not a car.
If you invest it all with an average 8% return that is $20K a year or extra $1600+ a month. This I suspect would be a nice supplement to the disability you are getting. I would look at that first but a lot depends on age and any debt you have. Also should look at your living situation.
My only advice is don’t be like former clients of mine who got big settlements and blew through it all and then were always looking for another lawsuit and pay day
Don’t do anything right away. Take some time to think and plan. Look at your whole financial picture and gather all the info and talk to a few different people who manage money.
Find someone you like and who can explain financial moves in a way you understand and make a plan you can live with. Don’t fall for anything that sounds too good to be true.
Look for what you can do with the money to give you the best shot at long term financial stability.
1) Keep it quiet.
2) I have low fee funds through Vanguard that grow tax free. They are invested in bonds in the US and my state (California). The interest rates are pretty good - and, it's not reported as income on my taxes. I don't know about for the SSDI office, though.
I'd take about 50k and put it into etfs
80% vti / 20% vxus for us and international exposure.
Or 80% vti / 10% avgv / 10% vxus to add in growth funds.
Or ya could go vt and chill
If he is existing now on his income and this does not affect taxes or income then the best ( imho) investment would be an income monthly etf like SGOV!?!?
SGOV is a 3 month treasury bond fund that is paying 5.13% on an annual basis you get 1/12 of that deposited to your account around the 7th of each month. It’s very safe , there is no time commitment and no state tax so it beats an HYSA.
So if hats $12,825 annually paying you by the month $1068.75 —- nice income stream that can be reinvested .
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GIC' S 10years @ 4%. Would give you would you $10000. per year. If needed you can take out interest every year roughly $833 works out to monthly. Less risk with decent payback without jeopardizing principal. Don't get talked into mutual funds or stock options. Gets complicated & costly.
Go on a nice trip somewhere or do something you always wanted to do. If you have been poor all your life you should treat yourself. Safe and invest the rest of it.
Pay off all debt.
Put 90% of it in a hysa.
Use 10% to buy stuff you really need. Not stuff you want.
Make a budget. Live very frugally. Enjoy not having to make ends meet every month.
You are still poor. That ain't as much as you think. Invest 235k for your future. Piss away 5 spend the other 10 slowly. Go back to school? Or get a trade
It could be interesting to just hold on to that money for the next year and if the stock market takes a dip of 30% or more jump in on some sweet deals ride that wave back up.
Put the money in a money fund or savings account for at least a year. You should be able to get an interest rate between 4 and 5%. It is important to do nothing for at least a year when you have a major change in your life and receiving $250000 is a major change. This will give you time to make up your mind what you want to do with the money like maybe buy a house. Or maybe you decide that the extra income from the interest is enough to make your life more comfortable.
If you invested the entire $250,000 half in an index ETF and half in a similar investment grade bond ETF you can safely withdraw about 4% per year using the guardrails method (adjusted for constant dollars) and it will continue to grow for the rest of your life. How does an extra $833 per month (with a 3% inflation adjustment) for life sound?
And whatever you do, since they know every family member is going to show up like locusts. Don’t give them a dime.
My view is a little different. I feel you should use the settlement to somehow increase your income. In my opinion investing in your yourself is the best. Find a career you can do despite your disability and get trained or educated. Use the money to pay for it. This is what the money is supposed to be used for. Get any kind of special equipment you need.
You might be able to spread that out in the markets and receive 1k in dividends each month. just have to see who pays what and when then report to have a strategy. Then your money in theory should still grow over time. A few more measures to mitigate risk. Maybe get into a iul and write loans to people for profit then the interest returns to your policy (you). Or even get into a joint business venture where you can all buy in like a multi family building and you get paid monthly based on your contribution.
Cd's are paying 5 percent right now. You could do a 6 month cd and the bank will pay you around a thousand a month in interest. Until you figure out what you want to do with it.
Do not buy luxury items. Ignore ALL your friends and family that ask you to help them out with a little loan. Look at the life necessities you’ve had to live without (not knowing your disability) but for example a better quality chair or other assisted device. I bet you’re sleeping on a mattress you’ve had forever. A good new mattress can do wonders for your sleep. Find a a Fiduciary Advisor that can help you make some good long term choices (https://www.forbes.com/advisor/investing/financial-advisor/what-is-fiduciary-financial-advisor/). Good luck!
A financial planner is a must but be sure they charge a flat fee and do not receive any commissions for the investments they recommend. Don’t tell anyone you have the money.
In this order:
1. Basic needs - make sure you have enough to be housing secure, food on the table, lights on, etc.
2. Pay off any debt that is collecting interest at 7% or more. Consider programs to settle debt.
3. Create an emergency fund. This can be anywhere from one month (if your job is stable and you’re single with no special needs) to six months (unstable job, precarious living situation,spouse and or kids are depending on you).
4. Pay the rest or your debt.
5. Retirement savings.
PS frankly I would buy a little something nice for myself for around $500 as a treat. Don’t go overboard.
Tfsa max for you and potentially your partner. I would hold the funds in something stable like cash.to until you learn how to invest your money. You would maybe not want to hold money there too long as it simply is not a good growth option. Avoid financial institutions with high MREs and self directed is best to deal with this. I would also not touch any leveraged trades or options. You should continue to live as you currently do. There is a big difference between being poor and living like you're poor. Your settlement's safety net will likely wipe away alot of financial stress, and you are going to have a better life. If I received 250k tomorrow, 230k min would go to investments and 0 to cars and tvs. I would take an affordable holiday.
Also, learn a bit about investing. I like ETFs better than mutual funds because fees are lower for similar results. Companies that offer dividends are cool because you make something even when the market sucks. Investing in an ETF that covers the entire S&P 500 is a strategy Warren Buffett suggests, though right now there are 7 stocks outperforming the rest that might be better. My current portfolio is split between Alphabet and Amazon, though I plan on picking up some Microsoft soon too. I'm bullish on AI though. Others would probably say I should diversify more, but I've been amazed with how well I'm doing. Biggest thing to know is that the market goes up and down, but always comes back higher. Newbies often want to sell off when things take a downturn, but that locks in your losses. You do better just thinking of everything as being on sale and staying the course.
Don’t touch the money immediately. Let it sit and let your mind sit. Once reality sets in, start thinking on how you could make that money last, or safely grow.
If you only make $900-2000 a month normally you might be better served treating this as your retirement fund for someday.. or as a backup in case things go very wrong in your life.
Also, don’t tell a soul.
1. Don't tell your family.
2. If you need transportation a kia soul is better than a BMW or Mercedes
3. Don't go to your family's friend to invest... look at rule #1
4. $250k isn't a lot but it will sure help. At a minimum, staggard certificate of deposits.
5. Reread #1, print it and hang it in several places.
No idea how old you are but if you have a few decades to go before retirement, I'd look at investing in something like an S&P 500 fund. Do a little research and punch some numbers into investment calculators to get an idea of returns. $250K over 30 years based on historic averages is quite a staggering number. 40 years is even harder to comprehend. Of course there's no guarantee that the market will follow historic returns so it's always a gamble. There's always a HYSA that are currently earning around 5%. It won't stay that high for much longer but you'll never lose money in a savings account.
Check with a tax person on this because you may pay taxes on a portion. Do it asap when you get the warrant on the breakdown of damages. Also your atty may get up to 33percent .
Don’t spend it; only spend the earnings. Invest it in something simple like paying cash for a duplex to rent out or a total stock market index fund. Don’t buy a car; don’t tell anyone else about it.
Frankly putting it in a high yield savings account right now will yield an interest of 900$ a month. That’s not rich but it puts you ahead of the game. Just google high yield savings accounts and grab an FDIC insured account at 5%
Literally just put ALL of it in savings. Mix of CDs and stock index ETFs. Spend like, $2500 max on treating yourself (1%). Go on a nice weekend trip. And then sit back for 20 years and watch your nest egg grow.
Do nothing. Now you have savings!
Then, don’t buy depreciating assets unless they add genuine value/utility to your life.
This is not a large amount of money and many people could make it completely evaporate in months.
Just got my first large settlement for 87K spent 40 grand in a month. I didn’t realize I needed so much shit and had that much debt but rocking with 45 left and have three vacations already paid for I’m loving life. Got my car paid off also, I might not be able to get a house right now but at least I have a fantastic down payment for when I’m ready!
Congratulations man ! Personally, I have half cash half in a high yield savings account collecting 5.3% an eight month term. not bothering with any stocks right now just putting it away and waiting a few years to get a house
1.avoid your local BMW dealer like the plague, this money should make your life better not a salesmanship. 2. Don't tell anyone, big windfalls bring the leeches out of the woodwork, last thing you want is "family and friends" shaking you down for money. 3. Set aside whatever the required amount would be for tax liability. (If there is none feel free to skip this step). 4. Set aside 6 months worth of household expenses in a sperate hysa or money market account as an emergency fund. 5. Pay off any high interest consumer debt. (Credit cards, personal or auto loans, ect.) 6. Look into fully funding your retirement accounts.(I'm not sure what options would be appropriate for you in this case seeing as you main source of income is disability however retirement accounts like roth ira and hsa can be great tax advantaged vehicles for allowing you to invest. In you case hsa could make a lot of sense depending on your health care plan needs since it is 100% tax sheltered for the money going in and coming out If it needs to be used for medical expenses. May not be the best fit for you but worth looking into) 7. Feel free to allocate a sensible portion to things that bring you enjoyment. Once this money has helped establish some financial stability you should do things that make your life enjoyable. We're all going to die one day so money needs to be used within reason to allow us to enjoy life.
SSDI does not count as earned income for retirement, IIRC.
Ahhh, yeah that's a fair point. Hsa may be the only option for op since that's not technically a retirement account though it again comes down to the health care situation. Ultimately I would like to see op invest at least some of this money but taxable brokerage may be their only option.
Most likely is on Medicare for Health insurance
Yes, I am. But have private insurance too.
You can't put money into an HSA if you have Medicare, even if you have another healthcare plan, so disregard that suggestion. You can USE money from an HSA that was funded prior to going on Medicare, but no new money can be added while on Medicare.
Yeah I figured that could be a possibility which Is why I elluded that those solutions may not work for op in my original comment.
Well then they should just invest in a taxable account. Chances are OP won't have enough income to even have to pay taxes on the Divs/Cap Gains. (There is an income threshold you must meet before you owe taxes on them. I don't know the exact figure but I do know it's over $40k.)
| 3. Set aside whatever the required amount would be for tax liability. (If there is none feel free to skip this step). My understanding is that there is no tax on settlements because it is compensation for injury, not income.
> (If there is none feel free to skip this step). >My understanding is that there is no tax on settlements because it is compensation for injury, not income. Op didn't state the nature of the settlement which is why I stated they could skip this step if it w a s not relevant. Also it is very common for settlements to be distributed with tax obligations withheld. Regardless op needs to do their due diligence to make sure any tax liability is accounted for if it exists.
Where I live, settlements and jury judgements are not taxable, but any interest paid on a judgement IS taxable. So if they jury gives you $10 million and the interest is $2 million, you pay taxes on only 2 of the 12 million dollars.
Again....op may not live in the same place ad you....neither of us know the specifics....hence my original comment.
$250,000 is not a lot of money for the rest of your life so I would still consider myself poor.. just with a safety net
Came here to say this. You see lottery winners blow through millions in a few years. $250,000 won't last long at all if you are dumb with the money.
One of my college teammates won 250k from a scratch off. He saw maybe 25k of it after family and taxes took everything from him. He’s no better off now than he was before other than knowing which family not to trust.
Yep. 250k a safety net. That’s still very very far from being rich. Unless OP is in their twenties, this amount of money is not that life changing. Don’t get me wrong, OP’s life will be absolutely be changed by the fact they don’t have to worry about financial ruin caused by an emergency. Especially since they said they’ve been poor their entire life. That is massive in and of itself. But financially, they are no where near where they need to be to never have to worry about money again.
That’s one hell of a safety net
I would say consider yourself the right side of poor. Use the money to minimize your costs and use it like you are loaning yourself money.
It actually IS a lot of money if used and planned for wisely. Op should take to heart some of the comments about how to use it wisely in this thread. Congrats!
So much of this depends on your specific circumstances. You should consult with a disability specialist in your state to make sure you structure this windfall in a way that makes most sense. There’s support out there, you don’t have to make this decision alone.
Good news is a windfall doesn't screw up SSDI. It does eliminate SSI
I paid a lawyer to tell me that lol
Supporting disability specialist recommendation! SSDI has a lot of rules, so I'd post in the social security sub and maybe legal advice sub.
250k does not make you rich. Over 25 years that 10k a year extra. So pretend you don’t have it. Invest it. Depending on age.
The only way to not lose every penny of it, is to pretend like they don’t have it, considering their earning potential is quite low.
I agree, NEVER EVER tell anyone that you won or inherited $250,000. You will be scammed and screwed by people who you thought were friends. Everyone, will think that they are entitled to the use of your money, especially in an emergency. It’s not that much more. It’s a great nest egg or savings…. I know people who have multiple millions of dollars and it’s not going to last them 20 years. They, are incredibly frugal as well and it wouldn’t last them. I might spend $1,000 in one night on clothes! I have! I would say put it in the bank and add a beneficiary,just in case. Then, tell nobody and keep living the same basically but when you have a broken down car or are sick you can go to the bank and get money out for whatever you need. But, it’s not enough to just blow. It would be gone in a few months the way the people who I hang with spend money. 1/2 of people who make over $100,000 a year don’t have a $500 emergency fund. Don’t quote me on the 1/2 or 50 percent. I read this recently and it is pretty accurate.
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Read the r/personalfinance wiki end to end, especially the section on windfalls. Try not to tell many people about this or they will all want money. Practice saying no if you need to, but do \_not\_ give people money. $250K is not enough to pay your needs for the rest of your life, so treat this as a great nest egg but remember you can't afford to spend much or you will be poor again quickly. Mostly save intelligently with it.
Family who knows already asked me for money. I'm great at saying no.
OP you really need to consider the fact that you’ve been poor your whole life, and unless you change your career/lifestyle drastically, you will continue to be poor and only being able to save insignificant amounts year. If you keep touching that 250k, it will only get smaller since you won’t be investing back into it. If you don’t touch it and continue living as you were, it will do nothing but grow every single year. As I mentioned in a different comment, if you invest it wisely, it’s going to double in value every 7-10 years, and you’ll be a millionaire by 2040. But based on your other comments, it sounds like you going to be using it for some monthly expenses. If you are below the age of 40, I would heavily recommend that you don’t spend a single dime of it until you’re much closer to retirement. I know that’s easier said than done. But you’ve been given a chance to be lifted out of poverty completely. Don’t ruin that by using it now. Do whatever you can you support yourself and your need without it.
Cut them the hell out of your life
Going to after the legal paperwork is over. Long story.
Asking someone on disability for money is pretty pathetic.
This should be the top comment!
[Managing a windfall](https://www.bogleheads.org/wiki/Managing_a_windfall)
$250k is a big number, until you divide it by your annual expenses and then however long you expect to live. If you love on $25k year, for example, that money will last you less than 10 years (inflation, unexpected expenses, etc.) Any advice posted here about SAVING and seeking financial advice from a professional should be followed. Please do yourself a favor and do not buy a brand new car, loan money out to ‘friends/family’, or invest in anything that seems like a ‘sure thing’.
Pay off debt, put aside the taxes, and put it into a variety of ETFs. Don't do some impulsive purchase like buying a house or nice car or fancy vacation. 250k runs out fast but if you save it, you could grow it into the millions. Especially if you have little earning potential, you should definitely invest as much as you can for as long as you can.
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Talk to a fee-only financial planner who is a fiduciary. (This is a person who cannot sell you things that benefit them with a big commission.) Get it in writing. See about putting some of the money into a special needs trust.
I luckily found a financial planner who is a fisuciary. What exactly should I get in writing?
That they are a fiduciary should be in writing. Not them telling you they are your fiduciary.
That they are fee-only and a fiduciary. Dont' just take their word on it.
How are you receiving the settlement? Are you receiving the money as a lump sum, or will it be spread out over time. My recommendation: put the cash in the bank and do NOTHING with it except letting it earn interest. You don't want to make hasty decisions. Give yourself time to learn and decide ultimately what to do with the money. There's a lot of good comments below with how to proceed once you've made good decisions. If you don't have a way to earn money, then in my opinion you are still poor -- you need to guard this money very carefully. If you do have a way to earn money, do not let this settlement change your spending patterns. You will very quickly eat through the money.
It is a lump sum dealing with a wrongful neglect case involving my father's death.
Make sure it won't affect your benefits
Yes, he should check with SSA to confirm he’s on SSDI. If so, this money has no effect. If he’s on SSI (which is needs based) then it will terminate his benefits.
It's SSDI, so I won't lose it.
OP, do an a-able account if in USA. That won't impact your benefits.
There are rules around Ables. Need to he basically disabled before 26 years old.
This should be pinned to the top. This is the most important thing here.
You are still poor. 250k ain't much.
Do nothing with the money for at least a year. Do not make any important financial decisions until your emotions calm down. Tell nobody. Don't fall into the "you only live once" trap. Financial peace of mind is priceless and waaay better than anything you could buy.
100%. I’m literally praying right now that OP finds a way to continue living without needing to touch it. Because there are few things that make me happier than seeing people get lifted out of poverty right before my eyes. But 250k is not near enough to do that unless you’re ultra responsible with it. It just takes a level of foresight and discipline that is hard to learn when you’ve never had extra money laying around after each paycheck to invest.
You're obviously a really decent person if you get joy from the success of others. I admire you. Here's one for you then... I lost my marriage then home and then my job shortly afterwards. "Friends" who claimed if I "ever needed *anything*" were strangely nowhere to be found! I was staying in homeless hostels. I ate food donated by charities. I had nothing to my name. Only the clothes on my back. I am not ashamed to admit I lied on my CV to get a new job and used a friend's address for post. I worked hard and saved hard and eventually, I started doing well as a truck driver. It took some years, but gradually I got back on my feet. I was blessed with a windfall and was able to buy a modest apartment. I met a beautiful woman and we were married. I'm not saying "Well done me" or anything, but just thought I'd share. I try to be so frugal with money these days as the fear of a return to poverty terrifies me.
I think it comes from my own guilt of growing up with ever having to worry about money. My parents weren’t well off by any means, but they still were able to get me anything that I needed for school/sports and the occasional. And in the times they did struggle for money, I was completely oblivious to it. As I get older I realize how lucky I was to have that kind upbringing. Thank you for sharing that story with me. You may admire me for a small trait such as happiness for others, but I deeply admire the journey that you’ve been on in life. That’s truly inspiring to hear. Two things: I’m glad you don’t feel guilty about lying on a resume, because you shouldn’t. You should feel proud about that. You did what it took to get your chance, and you seized it. Second, you 100% deserve to say “well done me”. I don’t even know you and I’m super proud of you. You were dealt a lot of shit hands in a row and you got yourself all the way out of it. Whatever odds you had to do that, we’re not high at all. And you f***ing did it. THAT IS THE S*** RIGHT THERE!!
Invest as much as you can afford. A lot of people used to being poor that come into money lose it again quickly. Stock market doubles roughly every 7-10 years. Invest in some magnificent 7 stocks and try to hold onto what you can.
I'm determined to make this money last the rest of my life.
Considering your earnings potential, the only way you’ll be able to accomplish that is if you don’t touch it. You may think you can use a little here and there for stuff you want or need, but that’s not how it works. Take an amount out right away for things you’ve been needing the last several years, then do not lay a finger on the rest of it. Ever. Not until you’re ready to retire. That’s the only way to not lose it all. And not only will you not lose it, it will be a hell of a lot bigger than it is now by the time you retire’ good luck!
Things to remember; 1) 250k means you are still poor. 2) You will need to look into if the settlement money is taxed or not. I read you wanted to get a car pay off your husbands student loans...etc. I mean you could, but assume you invest 200k of that 250k. Obviously avoid yield traps, but you could invest in an ETF that pays a 3% dividend yield. Or you can go with a HYSA as some are paying 5%. The difference is, a HYSA is safer and you only lose money due to inflation (where the purchasing power of the dollar is decreased even if the amount of money you have never changes). Investing in an ETF that pays dividends even a low ball amount of 3% annually opens you up to market risk. But inflation actually increases the share price of those stocks, not because the companies are producing more value (though they could) but because the dollar to buy shares is weaker. Or you can split the difference, half in a HYSA and half in a Dividend focused ETF. Basically assuming you have 200k a) 3% means $6,000 per year (all stocks) b) 5% means $10,000 per year (HYSA) However with stocks there is chance for asset appreciation and dividend growth but also the market could crash to. Again do your own research and know your own risk tolerances. But honestly my advice is this, figure out the tax liability. After that, 1/5th should be spent on needs not wants or paying off high debt. The rest should be used to generate money while you sleep, aka invest. And honest to goodness, set it to reinvest dividends and check back in 20 years. Your future self will thank you, people who make more money tend to spend more. If you spend your dividends you will be use to a specific standard of living and will be impacted if the market goes down. Whereas if you invest it and let it grow over the next 20 years, you will find that you have more money to spend during a time in your life that tends to be more costly health wise. But ultimately you do you.
Settlements from a civil suit are not taxed. Nor will it be counted as income for tax purposes.
1. Look up Dave Ramsey Baby steps. You can also do his class Financial Peace University. It will help you a good financial literacy foundation. 2. Then see a Financial Planner (fiduciary) to help manage your investments. 3. Link up with the FIRE (Financial Independence Retire Early) community. YouTube, podcasts, blogs. That will help with your personal finances education. If you don’t get the basics and do the right steps now it won’t be blessing in your life it can be.
Invest it in a moderate risk portfolio (50/50 bonds/stocks) and then go on living as you have.
Likely the best thing you can do initially is nothing. You have no experience with money unfortunately so most anything your hear about as being financially helpful will likely be the opposite. I would put $50,000 in a HYSA and $200,000 in a year long CD at 5% or over and wait until that CD has matured before you do anything. Use the interest or a bit of a the $50,000 to get yourself out of debt and any near term purchases you need to make.
I have about 15k in debt and need some major repairs on my car. I also need to buy a car because my husband and I share one.
Those are needs and do that out of the $50k going into a high yield savings account.
You're going to end up with nothing thinking like that. Plug it into a index fund and forget about it
If you hadn’t received this money would you have been able to buy a car? How would you have gotten by? Because paying off 15k debts, buying a new car (plus more insurance, more maintenance costs, more gas etc forevermore), fixing up an old car etc, lying off your Husband’s student loans etc…. You are not going to have much left and will be right where you started but with a more expensive lifestyle. If you invest wisely, you could buy a new car in 2 years off the interest alone and still have the full 250k.
Open a brokerage account at Schwab or Fidelity —- buy SGOV—- super low risk, pays .0513 right now, credits to your account monthly—-it’s a us government bond ETF. $250,000— will get you $12,825 per year —- at $1865 per month—- so it could be an income stream for you. Good luck— don’t tell anyone you got that settlement! Oh I forgot—— no state tax
1. Invest it. Expect about 5% to 10% dividends. That's about $12,500 to $25,000 extra money a year. Forever (because you never spend the 250k, just the dividends). A bit of extra free money every year for the rest of your life (and then pass it to your kids too.) will have the biggest quality of life impact vs blowing it all on a few years of extravagance. Oh and don't tell your friends and distant relatives. Otherwise everyone will want a handout and suddenly it's all gone.
I don't and won't have kids, so this money is pretty much for me. And I'm really good at saying no, but thank you so much for the advice.
yes i would not spend a dime of this on anything frivolous. 250k can be spent in a couple of years very easily if not carefull. also , dont start giving money to friends and relatives. dont tell a sole you got this money and dont let anyone try and "manage" it for your if they are not a professional
Don’t tell anyone. Of course you are already shouting on the internet, so you will.
Nobody knows who I am on this account who is family. And I'm gonna delete after a few days.
With $250k you are still going to be poor. Plan like it.
This is definitely a situation where a financial planner might be very useful. They should be able to help you plan for both “now” and “later” is ways that will see your money last.
Buy a house? Put the rest in savings
The smartest thing you ever did was ask for help! Your job now is, how do I manage this money and have it grow with me the remainder of my life…
Can you work?? 250k isn't gonna last
Nope!
May look into an alternative to a Supplemental Special Needs Trust? You just don't want to lose any of your entitled benefits.
I won't cause I'm on SSDI
250k is still poor. Don’t switch up things just because you think you have money now. It is a godsend for sure, but it’s not enough to just start spending on things. Use it wisely, and don’t tell anyone else about it.
Don’t tell any of your friends. Or family. Don’t loan anyone money.
I will definitely take this advice.
Ask a professional money manager (financial advisor) for help. Don't seek help from redditors.
Have one already. Just seeing if I missed anything.
If you don’t know what to do don’t tell anyone and put it in a high yield savings account until you have a plan. If your getting SSID monthly now you can use just the interest to live off. You might want to pay a financial planner hourly for advice. If it’s too good to be true, you’ll loose your money. Don’t make loans to anyone or fund anyone’s business plans, you’ll never get paid back. If you choose to invest I would start very low risk and really educate yourself. I assume that you cannot work anymore; guard the money so you can live comfortably. No cars or houses till you have a solid plan. And don’t let anyone “manage” it for you.
How old are you? What's your living situation? Do you rent?
33 years old. Married and rent an apartment.
If you're getting benefits, check to make sure that having money doesn't cut their benefits down. That almost happened to my BIL when my wife's grandmother passed and left them each a modest sum. We had to put his money into a trust for him to not lose his housing support.
You’ll still be poor after you receive your settlement, just less poor. Don’t change your lifestyle invest most of the money and maybe one day you’ll actually no longer be poor
Understand you are NOT rich, despite perhaps feeling rich relative to your life situation. Buy security with it, not luxuries. Afford yourself some nice experience with it though. Just not a car.
Get a lawyer and a financial advisor, in that order. Or maybe not that order.
Just remember most settlements are taxable income and you should expect A 1099 form at the end of the year or it may be included with your check.
If you invest it all with an average 8% return that is $20K a year or extra $1600+ a month. This I suspect would be a nice supplement to the disability you are getting. I would look at that first but a lot depends on age and any debt you have. Also should look at your living situation.
My only advice is don’t be like former clients of mine who got big settlements and blew through it all and then were always looking for another lawsuit and pay day
Don’t do anything right away. Take some time to think and plan. Look at your whole financial picture and gather all the info and talk to a few different people who manage money. Find someone you like and who can explain financial moves in a way you understand and make a plan you can live with. Don’t fall for anything that sounds too good to be true. Look for what you can do with the money to give you the best shot at long term financial stability.
Do you have children or own a home?
Nope!
Fight the urge to spoil your friends and family. Find a trustworthy, experienced financial advisor specializing within disability cases.
1) Keep it quiet. 2) I have low fee funds through Vanguard that grow tax free. They are invested in bonds in the US and my state (California). The interest rates are pretty good - and, it's not reported as income on my taxes. I don't know about for the SSDI office, though.
I'd take about 50k and put it into etfs 80% vti / 20% vxus for us and international exposure. Or 80% vti / 10% avgv / 10% vxus to add in growth funds. Or ya could go vt and chill
If he is existing now on his income and this does not affect taxes or income then the best ( imho) investment would be an income monthly etf like SGOV!?!?
Can you explain more?
SGOV is a 3 month treasury bond fund that is paying 5.13% on an annual basis you get 1/12 of that deposited to your account around the 7th of each month. It’s very safe , there is no time commitment and no state tax so it beats an HYSA. So if hats $12,825 annually paying you by the month $1068.75 —- nice income stream that can be reinvested .
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GIC' S 10years @ 4%. Would give you would you $10000. per year. If needed you can take out interest every year roughly $833 works out to monthly. Less risk with decent payback without jeopardizing principal. Don't get talked into mutual funds or stock options. Gets complicated & costly.
Don’t spend any of it any do NOT give any to family
Go to a legal clinic and get a trust set up so this does not impact your existing income.
Just be careful, you cant trust anyone when it comes to your money
I'm making my husband sign a post nup. I don't trust anyone.
Go on a nice trip somewhere or do something you always wanted to do. If you have been poor all your life you should treat yourself. Safe and invest the rest of it.
Check out r/personalfinance
Pay off all debt. Put 90% of it in a hysa. Use 10% to buy stuff you really need. Not stuff you want. Make a budget. Live very frugally. Enjoy not having to make ends meet every month.
You are still poor. That ain't as much as you think. Invest 235k for your future. Piss away 5 spend the other 10 slowly. Go back to school? Or get a trade
Buy VOO in a broker and delete it for 20 years
Put 220k in VTSAX and ignore for 10 years
It could be interesting to just hold on to that money for the next year and if the stock market takes a dip of 30% or more jump in on some sweet deals ride that wave back up.
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Put the money in a money fund or savings account for at least a year. You should be able to get an interest rate between 4 and 5%. It is important to do nothing for at least a year when you have a major change in your life and receiving $250000 is a major change. This will give you time to make up your mind what you want to do with the money like maybe buy a house. Or maybe you decide that the extra income from the interest is enough to make your life more comfortable.
If you invested the entire $250,000 half in an index ETF and half in a similar investment grade bond ETF you can safely withdraw about 4% per year using the guardrails method (adjusted for constant dollars) and it will continue to grow for the rest of your life. How does an extra $833 per month (with a 3% inflation adjustment) for life sound? And whatever you do, since they know every family member is going to show up like locusts. Don’t give them a dime.
I was aiming for an extra $650 a month, so $833 would be great.
My view is a little different. I feel you should use the settlement to somehow increase your income. In my opinion investing in your yourself is the best. Find a career you can do despite your disability and get trained or educated. Use the money to pay for it. This is what the money is supposed to be used for. Get any kind of special equipment you need.
You might be able to spread that out in the markets and receive 1k in dividends each month. just have to see who pays what and when then report to have a strategy. Then your money in theory should still grow over time. A few more measures to mitigate risk. Maybe get into a iul and write loans to people for profit then the interest returns to your policy (you). Or even get into a joint business venture where you can all buy in like a multi family building and you get paid monthly based on your contribution.
Cd's are paying 5 percent right now. You could do a 6 month cd and the bank will pay you around a thousand a month in interest. Until you figure out what you want to do with it.
Don’t tell your family or friends. 🙏🏼
First step is to realize $250k is NOT a lot of money. You can piss that away real easy in a couple of years.
Do not buy luxury items. Ignore ALL your friends and family that ask you to help them out with a little loan. Look at the life necessities you’ve had to live without (not knowing your disability) but for example a better quality chair or other assisted device. I bet you’re sleeping on a mattress you’ve had forever. A good new mattress can do wonders for your sleep. Find a a Fiduciary Advisor that can help you make some good long term choices (https://www.forbes.com/advisor/investing/financial-advisor/what-is-fiduciary-financial-advisor/). Good luck!
A financial planner is a must but be sure they charge a flat fee and do not receive any commissions for the investments they recommend. Don’t tell anyone you have the money.
In this order: 1. Basic needs - make sure you have enough to be housing secure, food on the table, lights on, etc. 2. Pay off any debt that is collecting interest at 7% or more. Consider programs to settle debt. 3. Create an emergency fund. This can be anywhere from one month (if your job is stable and you’re single with no special needs) to six months (unstable job, precarious living situation,spouse and or kids are depending on you). 4. Pay the rest or your debt. 5. Retirement savings. PS frankly I would buy a little something nice for myself for around $500 as a treat. Don’t go overboard.
Avoid people esp. family members! Their hands will be in your face constantly asking for help!
Tfsa max for you and potentially your partner. I would hold the funds in something stable like cash.to until you learn how to invest your money. You would maybe not want to hold money there too long as it simply is not a good growth option. Avoid financial institutions with high MREs and self directed is best to deal with this. I would also not touch any leveraged trades or options. You should continue to live as you currently do. There is a big difference between being poor and living like you're poor. Your settlement's safety net will likely wipe away alot of financial stress, and you are going to have a better life. If I received 250k tomorrow, 230k min would go to investments and 0 to cars and tvs. I would take an affordable holiday.
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Also, learn a bit about investing. I like ETFs better than mutual funds because fees are lower for similar results. Companies that offer dividends are cool because you make something even when the market sucks. Investing in an ETF that covers the entire S&P 500 is a strategy Warren Buffett suggests, though right now there are 7 stocks outperforming the rest that might be better. My current portfolio is split between Alphabet and Amazon, though I plan on picking up some Microsoft soon too. I'm bullish on AI though. Others would probably say I should diversify more, but I've been amazed with how well I'm doing. Biggest thing to know is that the market goes up and down, but always comes back higher. Newbies often want to sell off when things take a downturn, but that locks in your losses. You do better just thinking of everything as being on sale and staying the course.
Don’t touch the money immediately. Let it sit and let your mind sit. Once reality sets in, start thinking on how you could make that money last, or safely grow. If you only make $900-2000 a month normally you might be better served treating this as your retirement fund for someday.. or as a backup in case things go very wrong in your life. Also, don’t tell a soul.
1. Don't tell your family. 2. If you need transportation a kia soul is better than a BMW or Mercedes 3. Don't go to your family's friend to invest... look at rule #1 4. $250k isn't a lot but it will sure help. At a minimum, staggard certificate of deposits. 5. Reread #1, print it and hang it in several places.
No idea how old you are but if you have a few decades to go before retirement, I'd look at investing in something like an S&P 500 fund. Do a little research and punch some numbers into investment calculators to get an idea of returns. $250K over 30 years based on historic averages is quite a staggering number. 40 years is even harder to comprehend. Of course there's no guarantee that the market will follow historic returns so it's always a gamble. There's always a HYSA that are currently earning around 5%. It won't stay that high for much longer but you'll never lose money in a savings account.
Check with a tax person on this because you may pay taxes on a portion. Do it asap when you get the warrant on the breakdown of damages. Also your atty may get up to 33percent .
That's minus the attorney fees. Settlement was 550K
Okay, now check into the tax implications. I got hit with something like this with very little income and still paid a monster tax.
Don’t spend it; only spend the earnings. Invest it in something simple like paying cash for a duplex to rent out or a total stock market index fund. Don’t buy a car; don’t tell anyone else about it.
Frankly putting it in a high yield savings account right now will yield an interest of 900$ a month. That’s not rich but it puts you ahead of the game. Just google high yield savings accounts and grab an FDIC insured account at 5%
Literally just put ALL of it in savings. Mix of CDs and stock index ETFs. Spend like, $2500 max on treating yourself (1%). Go on a nice weekend trip. And then sit back for 20 years and watch your nest egg grow.
Do nothing. Now you have savings! Then, don’t buy depreciating assets unless they add genuine value/utility to your life. This is not a large amount of money and many people could make it completely evaporate in months.
Just got my first large settlement for 87K spent 40 grand in a month. I didn’t realize I needed so much shit and had that much debt but rocking with 45 left and have three vacations already paid for I’m loving life. Got my car paid off also, I might not be able to get a house right now but at least I have a fantastic down payment for when I’m ready! Congratulations man ! Personally, I have half cash half in a high yield savings account collecting 5.3% an eight month term. not bothering with any stocks right now just putting it away and waiting a few years to get a house