FEBRUARY 18, 2020
How to Manage Monetary Compensation After an Accident
Monetary compensation after an accident should be handled with diligence, including paying off debt and calculating long-term recovery expenses first.
How should accident survivors manage their monetary compensation following a motor vehicle collision? What steps should they take to ensure that money lasts as long as possible? When a car accident survivor receives their settlement, it's only natural to want to celebrate with a splurge or two. However, splurges add up quickly, and funds can deplete faster than expected. Thus, it is crucial to step back and work closely with a financial planner and an accountant to determine the best ways to spend (and save) the funds before spending a single penny.
1. Pay Off Debt First
Medical bills and other expenses can accumulate while an individual recovers from a motor vehicle accident. Paying these bills off in their entirety with the monetary compensation from the settlement is the first thing individuals should do when the check clears. Depending on income and tax bracket, it may also be advisable to pay off mortgages, car loans, student loans, and other debts.
2. Calculate Long-Term Care/Recovery Expenses
If surgical procedures, long-term physical therapy, adaptive living aids, nursing care facilities, etc. are expected in the future, individuals should estimate these costs and put their monetary compensation into an account earmarked for these expenditures.
3. Factor in Earning Capacity
If the injury prevents returning to work or limits the individual's ability to work, it is advisable to calculate the anticipated reduction in earning capacity. Funds should be set aside to supplement the individual's pre-injury income as much as possible, and for as long as possible.
4. Save for Retirement (And a Rainy Day)
It never hurts to bolster retirement savings, and individuals can use their settlement to improve their long-term financial position. Over time, the funds put into the account now can multiply several times over. Thus, magnifying the benefit of the settlement on the individual's standard of living in retirement. Similarly, if the compensation is sufficient enough, it's always a good idea to keep six months or more of income in the bank in case the rain starts to pour.
5. Watch the Funds Closely
Individuals should strictly limit access to their settlement funds and should resist requests from family members and friends for loans, gifts, and other financial assistance. Only requests for critical needs should be considered.
Finally, when the bills are paid, the debts are gone, and the savings stable, the funds that are leftover are what individuals have available for a splurge or two.
Our Wichita based personal injury lawyers are accident attorneys who have offices across Wichita and in Garden City. Our team will instantly go to work to prove accident injury victims are not at fault. You can use our contact page or get a free call at our Wichita offices at 316-684-4400 and our Garden City office at 620-843-2855.
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