There is no doubt that selling your structured settlement payments can help get you out of a tight financial situation. If you or a loved one are receiving structured settlement payments or you are expecting to receive settlement payments there is a good chance that you are considering the possibility of selling structured settlement payments for one lump sum of cash but is selling this guaranteed income stream the right thing to do. As in most financial decisions, there is no single answer as everyone’s situation is unique. There are however, a few things to you should think about before making this important financial decision. Here are three important ones to keep in mind.
1. Structured settlements are usually a result of an injury from an accident or medical malpractice that made you unable to continue to work. Unfortunately, for some recipients the payments are insufficient to cover their normal costs of living. In these cases seeking a lump sum payment may be the only real choice. However, it’s vitally important that you keep in mind that a lump sum will only cover you for a period of time. Once the lump sum is gone, you may be without any income or have limited income from Social Security disability. If you are in this situation and decide to take a lump sum for your payments, you should a) Create a monthly living expenses budget and adhere to it so as to be sure your lump sum of cash lasts as long as possible and b) Take a portion of the lump sum of cash for re-training in a job that you can physically handle or to start a home business. This way you should have enough monthly income to cover your monthly living costs.
2. If you are fortunate enough to not have to sell a structured settlement in a lump sum but are still considering selling your structured settlement’s payments, you need to determine if the future value of your periodic payments is worth less than a lump sum of cash in the present. You will need to get a lump sum quote for the payments so you can compare the two. Effectively, this comes down to what you think inflation will be over the remainder of your payments. Be aware of the government’s inflation numbers, as the core rate of inflation does not include items like food and energy because of their volatility. However, these costs of living are very real for every one heats a home, buys gasoline for their car or goes to the grocery store to buy food.
3. Lastly, if you are considering taking a lump sum to make a very profitable investment or pay down debt, you will need to analyze the expected return versus the fixed income from your structured settlement’s payments. You may want to consult a financial professional to help you figure out these two options.
Selling structured settlements can be a stressful event. Try and use logic and hard financial analysis to help you with this critical decision. Down the road, you’ll be happy you did.
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