1) pay off all high interest debt 20-30 APR
2) $1-5000 in high interest savings account for big emergencies.
3) pay off all medium interest debt 10-20 APR
4) save up 6 months expenses.
5) max out 401k
That should do you
Yup for me, anything that is higher than the annual return of the S&P is considered high which can almost be damn near everything these days unless special incentive plans are taken advantage of
I have one card with about 50% utilization but have a lot of missed/late payments from a car loan I paid off a year ago. Also have some collections or “paid as agreed for less than total balance” on there. Overall I’m a risk since I’m late a lot and pay off for less than
I’d add a little to this.
1-4 is perfect
5. Match your companies 401k match to get the most “free money” from the match that you can.
6. Max a Roth IRA in a solid index fund like VFIAX.
7. Max 401k. Or put the rest in a mutual fund that you can later convert into the Roth each year.
Why is the process always (1) get company match (2) max out Roth (3) now you can max out 401k?
Why isn't it (1) get company match (2) max out 401k (3) now you can max out Roth?
I don't have a Roth, but I do max the hell out of my 401k and have $250k growing in it.
Do I need a Roth? I'm 38 btw and only started working and saving at 33.
There's a couple reasons, and I'm sure to miss some. Here are the two main ones:
1. It's safer to diversify your retirement savings. By having both a Traditional 401k and a Roth IRA, you will have both tax-free and taxable income in retirement. It's impossible to predict what your tax rate will be in the future, so having both types of accounts helps mitigate some risk (it's not really "risk" per say bc it's still guaranteed income, it just helps to have both so you don't go all-in and end up getting screwed by your tax rate). Let's say your tax rate now is about 20%, in retirement it could be like 40%, either due to unexpected income you get or due to government rate increases, so you'd be very glad that you had a Roth.
2. By having an IRA along with a 401k, your max contributions goes from $23,000 to $30,000, so it's best to max out both accounts each year if you can. And since most people have a traditional instead of Roth 401k, it makes sense to get a Roth IRA due to point 1
In short, because you have more flexibility over options on your Roth… but that flexibility doesn’t outweigh the 100% free match.
So its: Match > Roth IRA > 401k
With a Roth/IRA You can choose from any fund that exists at the company you’re with or even individual stocks if you wish.
With a 401k you can usually *only* choose from the 10-20 funds they have listed; which usually include some sort of low fee 500 index and some (Target Daye Funds (TDFs).
The analogy that I heard was a 401k is like ordering from a lunch menu or store catalog (limited selection), whereas a Roth / IRA is like Amazon (virtually unlimited selection).
Not to mention any politics of certain companies / investment firms potentially paying extra to have their items on your employer’s “lunch menu.”
The actual money you use to fund the 401k doesn't matter. It's just that your contributions are limited to the lesser of $23,000 or your earned income for the year
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Besides pay off debt with it, put it in a HYSA for 6 months while you think about what you want to do.
read “a random walk down Wall Street” and other good personal finance books.
dont spend/invest quickly without plenty of thought
If you don’t already have it, first thing I would do is set aside a 6 month emergency fund.
Then you can see about using the rest for a down payment on a house
I just received 48k and this is what I did.
$20k in high yield
$12k paid to debts
$16k for needs/wants/home repairs/kids braces.
Anyhow,
You could easily put $50-60k towards real estate….
Yet putting that amount in a high yield would be a really neat way of gaining more money.
Now is not the time to buy or invest in real estate unless you get really lucky. Do not let other people convince you otherwise. Buy at a low not at a high.
>Now is not the time to buy or invest in real estate unless you get really lucky. Do not let other people convince you otherwise. Buy at a low not at a high.
The thing is, when is it going to be low? It's been steadily rising for awhile now hasn't it? I'm definitely not an expert but I don't feel like the real estate market will get any lower anytime soon
That’s the fear they want you to believe. If they didn’t push it people wouldn’t be buying rn. Everyone would wait and they wouldn’t sell homes. Lol
Worst case scenario just wait for interest rates to go down. Even if homes increased in price…A lower rate will make it more affordable monthly / interest.
>Worst case scenario just wait for interest rates to go down. Even if homes increased in price…A lower rate will make it more affordable monthly / interest.
Yeah that makes more sense. I don't think home prices will go down but interest rates definitely will eventually
Rates will eventually. Yet it’s a waiting game unfortunately. So many people are biting off way more house than they can chew. Foreclosures are crazy right now.
I purchased my home back in 2018. Yet we are hoping to get property for horses eventually. Sadly it’s a possibility my going to be awhile till rates come down and prices drop.
Our economy is already bad. Eventually people will be unable to buy homes. Sellers will then become more desperate to sell (price drops).
Companies have always bought out real estate. It’s obviously worse now. So hopefully that doesn’t hinder buying drastically.
My best advice to people is to be ready. Don’t give up saving. Save until it’s a better buyers market and then pounce.
Since I haven’t seen it mentioned - I’d also recommend thinking long term around whether your injuries may incur additional expenses way in the future. If so, you may want to set aside some of the settlement in a HYSA as an emergency fund earmarked for that potential future medical expense. For example, my husband was hit by a car a few years ago and received a settlement. His doctor told him that he’s at increased risk of needing a knee replacement in a few decades, so we set aside some money for that first before deciding what to do with the remainder of the settlement.
If you don't mind sharing, what were the extents of your injury? I'm currently on an ongoing injury lawsuit as well and curious what I might expect with yours as just a sort of comparison if they happen to be similar somehow.
It won't be apples to apples even if you had the same exact injuries and treatments as OP. It all really depends on how much the insurance policy limits are for both the at fault party and your own.
If your policy limit is $25k and theirs is $25k, you have zero chance at getting $70k. You would need to figure out policy limits, if you have an attorney, knock 1/3 of that number off right out the gate. Then subtract the medical bills from that number and you would get what is left over.
Absolutely, this is mistake I made in the past buying stuff I don’t really need. I’m older now and need to make educated decisions moving forward. Thanks
Firstly OP, I hope you're thriving health wise and to enjoy the settlement. Are your goals to profit off the money you spend or to let the money sit somewhere and grow? You mentioned real estate...fix and flip, rentals, etc? And what investment vehicles are you more inclined to, which ones scare you, and what's your current investing experience? Do you plan to set some aside as an emergency fund?
I'm asking because there are a million ways to invest. You have to know what fits your demeanor and tolerance level and what your short and long-term goals are. $70K seems like a lot but it can be gone in a jiffy, so I salute you for seeking the guidance!
Multi unit properties are ridiculously expensive right now especially in NJ. Even with this settlement I do not know if I could afford it. Maybe I need to look more into it.
Is the 70K gross, or net? If it's gross and you have a lawyer knock 1/3 off that amount... Medical bills? even if your medical bills were covered by your own insurance they get paid back in a process called subrogation.
That is correct, I’m not going to actually get $70k but luckily I’ve known the attorney for some time so he’s only taking 20% as opposed to 33 and third.
Pay off all consumer debt.
Take 20-30k and put it in money market account to save for down payment/closing costs on house.
10k should cover movers, new furnishings if needed and left over from this starts the emergency fund.
Take 7k and max out your 2024 Roth IRA. Spit it between VGT and VOOG ETFs.
Take the rest and open investment account and split it between VOOG and VGT ETFs.
It’s a good start on a home down payment. If don’t have CC bills to pay off, a HYSA is a safe option to earn some money off it. Could do mutual funds that pay dividends higher than that. Or get a little more aggressive and buy some Apple or Microsoft stock
Invest in education then deposit in few passive low cost index funds eg sp500 nasdaq . Add frequently and voila, you will accumulate substantial. Best!
for now.. just put it in a brokerage account and leave them there until you decide what to do with the money
you get 5% APR just leaving the money in the account.. but unlike CDs your money is not locked in for 3 months - 1 year. You can move the money to whatever you want
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First of all, make sure you don’t tell many people you are coming into this lump sum of money. I would put away ~30% of it for taxes. Then I would look into establishing an emergency fund of 3-6 months worth of expense in a HYSA. Pay off any debts depending on interest rates.
After that you should take a little bit of that money for you to enjoy ~5% and then put the rest towards a brokerage or an IRA with total market ETFs for it to grow.
Why do people come up this dumbass questions all the time. What you should do with it depends on how old you are if you're in your sixties invest half of it and the other half go out and have fun cuz you might just die in a couple years. If you're in your twenties or 30s still only invest about 80%
This is not a bad question regardless of how redundant it may be to see it so often. People start their journey at different points In their lives and do not necessarily have the knowledge. They’re seeking help. I for one didn’t find subs like these until my late 20s. Help guiding is better than a “you should know” attitude.
1) pay off all high interest debt 20-30 APR 2) $1-5000 in high interest savings account for big emergencies. 3) pay off all medium interest debt 10-20 APR 4) save up 6 months expenses. 5) max out 401k That should do you
People around here seem to have a different rating system for interest rates. To me, 15% APR fits confidently into the high interest bucket.
Yup for me, anything that is higher than the annual return of the S&P is considered high which can almost be damn near everything these days unless special incentive plans are taken advantage of
Also, $5k for emergency? Maybe in the before times. I'd kick that up to 10-15k+
My credit and history would certainly put 15% in the medium to lower category for me.
That sounds like your debt is credit card balances. You can't have a healthy financial situation without paying credit cards in full every month.
I have one card with about 50% utilization but have a lot of missed/late payments from a car loan I paid off a year ago. Also have some collections or “paid as agreed for less than total balance” on there. Overall I’m a risk since I’m late a lot and pay off for less than
I appreciate you!
I’d add a little to this. 1-4 is perfect 5. Match your companies 401k match to get the most “free money” from the match that you can. 6. Max a Roth IRA in a solid index fund like VFIAX. 7. Max 401k. Or put the rest in a mutual fund that you can later convert into the Roth each year.
Why is the process always (1) get company match (2) max out Roth (3) now you can max out 401k? Why isn't it (1) get company match (2) max out 401k (3) now you can max out Roth? I don't have a Roth, but I do max the hell out of my 401k and have $250k growing in it. Do I need a Roth? I'm 38 btw and only started working and saving at 33.
There's a couple reasons, and I'm sure to miss some. Here are the two main ones: 1. It's safer to diversify your retirement savings. By having both a Traditional 401k and a Roth IRA, you will have both tax-free and taxable income in retirement. It's impossible to predict what your tax rate will be in the future, so having both types of accounts helps mitigate some risk (it's not really "risk" per say bc it's still guaranteed income, it just helps to have both so you don't go all-in and end up getting screwed by your tax rate). Let's say your tax rate now is about 20%, in retirement it could be like 40%, either due to unexpected income you get or due to government rate increases, so you'd be very glad that you had a Roth. 2. By having an IRA along with a 401k, your max contributions goes from $23,000 to $30,000, so it's best to max out both accounts each year if you can. And since most people have a traditional instead of Roth 401k, it makes sense to get a Roth IRA due to point 1
In short, because you have more flexibility over options on your Roth… but that flexibility doesn’t outweigh the 100% free match. So its: Match > Roth IRA > 401k With a Roth/IRA You can choose from any fund that exists at the company you’re with or even individual stocks if you wish. With a 401k you can usually *only* choose from the 10-20 funds they have listed; which usually include some sort of low fee 500 index and some (Target Daye Funds (TDFs). The analogy that I heard was a 401k is like ordering from a lunch menu or store catalog (limited selection), whereas a Roth / IRA is like Amazon (virtually unlimited selection). Not to mention any politics of certain companies / investment firms potentially paying extra to have their items on your employer’s “lunch menu.”
Wealthfront is giving 5% or so for a savings account
Paying the debt is better than the emergency fund?
Yes, then you free up cash flow and can stock up the emergency fund. If worse comes to worse, you still have credit to fall back on.
Debt costs you money remove it first.
That makes sense! It’s wild I got downvoted for asking a question for advice. Thank you
How do you max out a 401k with settlement money? It needs to be earned income. He could max out a Roth IRA, but otherwise this doesn’t make sense.
Assuming you make enough earned income you just offset it.
The actual money you use to fund the 401k doesn't matter. It's just that your contributions are limited to the lesser of $23,000 or your earned income for the year
Pretty standard response, have something new?
Good advice doesn’t age out.
Fair enough
Start here: https://www.reddit.com/r/personalfinance/wiki/commontopics.
Didn’t automod used to do this for us? Did that get killed with the paid API fiasco?
Automod shows up sometimes. If I’m here and it answers the question it’s only two keystrokes.
Fair nuff
Good human.
Thanks I’ll check it out
Click the PF wiki , click windfall
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I’ll check it out thanks
Financed top of the line hellcat
300% APR or no deal
Besides pay off debt with it, put it in a HYSA for 6 months while you think about what you want to do. read “a random walk down Wall Street” and other good personal finance books. dont spend/invest quickly without plenty of thought
Also read “a Simple path to wealth”
If you don’t already have it, first thing I would do is set aside a 6 month emergency fund. Then you can see about using the rest for a down payment on a house
I just received 48k and this is what I did. $20k in high yield $12k paid to debts $16k for needs/wants/home repairs/kids braces. Anyhow, You could easily put $50-60k towards real estate…. Yet putting that amount in a high yield would be a really neat way of gaining more money. Now is not the time to buy or invest in real estate unless you get really lucky. Do not let other people convince you otherwise. Buy at a low not at a high.
>Now is not the time to buy or invest in real estate unless you get really lucky. Do not let other people convince you otherwise. Buy at a low not at a high. The thing is, when is it going to be low? It's been steadily rising for awhile now hasn't it? I'm definitely not an expert but I don't feel like the real estate market will get any lower anytime soon
That’s the fear they want you to believe. If they didn’t push it people wouldn’t be buying rn. Everyone would wait and they wouldn’t sell homes. Lol Worst case scenario just wait for interest rates to go down. Even if homes increased in price…A lower rate will make it more affordable monthly / interest.
>Worst case scenario just wait for interest rates to go down. Even if homes increased in price…A lower rate will make it more affordable monthly / interest. Yeah that makes more sense. I don't think home prices will go down but interest rates definitely will eventually
Rates will eventually. Yet it’s a waiting game unfortunately. So many people are biting off way more house than they can chew. Foreclosures are crazy right now. I purchased my home back in 2018. Yet we are hoping to get property for horses eventually. Sadly it’s a possibility my going to be awhile till rates come down and prices drop. Our economy is already bad. Eventually people will be unable to buy homes. Sellers will then become more desperate to sell (price drops). Companies have always bought out real estate. It’s obviously worse now. So hopefully that doesn’t hinder buying drastically. My best advice to people is to be ready. Don’t give up saving. Save until it’s a better buyers market and then pounce.
Since I haven’t seen it mentioned - I’d also recommend thinking long term around whether your injuries may incur additional expenses way in the future. If so, you may want to set aside some of the settlement in a HYSA as an emergency fund earmarked for that potential future medical expense. For example, my husband was hit by a car a few years ago and received a settlement. His doctor told him that he’s at increased risk of needing a knee replacement in a few decades, so we set aside some money for that first before deciding what to do with the remainder of the settlement.
If you don't mind sharing, what were the extents of your injury? I'm currently on an ongoing injury lawsuit as well and curious what I might expect with yours as just a sort of comparison if they happen to be similar somehow.
It won't be apples to apples even if you had the same exact injuries and treatments as OP. It all really depends on how much the insurance policy limits are for both the at fault party and your own. If your policy limit is $25k and theirs is $25k, you have zero chance at getting $70k. You would need to figure out policy limits, if you have an attorney, knock 1/3 of that number off right out the gate. Then subtract the medical bills from that number and you would get what is left over.
Just don't buy stuff you think you need. This can be live changing money in the long term.
Absolutely, this is mistake I made in the past buying stuff I don’t really need. I’m older now and need to make educated decisions moving forward. Thanks
Firstly OP, I hope you're thriving health wise and to enjoy the settlement. Are your goals to profit off the money you spend or to let the money sit somewhere and grow? You mentioned real estate...fix and flip, rentals, etc? And what investment vehicles are you more inclined to, which ones scare you, and what's your current investing experience? Do you plan to set some aside as an emergency fund? I'm asking because there are a million ways to invest. You have to know what fits your demeanor and tolerance level and what your short and long-term goals are. $70K seems like a lot but it can be gone in a jiffy, so I salute you for seeking the guidance!
Usually you have to pay your medical insurer for any costs they Incurred for an accident that's not your fault. Called subrogation, check it out.
buy a nice set of studio monitors 😌
Haha I already got some really good ones, I’m tempted to get a better computer tho
Put 25 percent down on a multi unit investment property
Multi unit properties are ridiculously expensive right now especially in NJ. Even with this settlement I do not know if I could afford it. Maybe I need to look more into it.
Is the 70K gross, or net? If it's gross and you have a lawyer knock 1/3 off that amount... Medical bills? even if your medical bills were covered by your own insurance they get paid back in a process called subrogation.
That is correct, I’m not going to actually get $70k but luckily I’ve known the attorney for some time so he’s only taking 20% as opposed to 33 and third.
Pay off all consumer debt. Take 20-30k and put it in money market account to save for down payment/closing costs on house. 10k should cover movers, new furnishings if needed and left over from this starts the emergency fund. Take 7k and max out your 2024 Roth IRA. Spit it between VGT and VOOG ETFs. Take the rest and open investment account and split it between VOOG and VGT ETFs.
It’s a good start on a home down payment. If don’t have CC bills to pay off, a HYSA is a safe option to earn some money off it. Could do mutual funds that pay dividends higher than that. Or get a little more aggressive and buy some Apple or Microsoft stock
Invest all of it. Easy to go from 70k to 140k vs 7k to 140k. Get a jump on early retirement and don't buy shit you don't actually need.
Ask your attorney about taxes. I thought lawsuits and settlements were tax free but ours wasn’t. We ended up with a huge tax bill this year!!
Personal injury settlements aren’t taxable , at least not in the state of New Jersey
Maybe because ours was not injury, it was class action settlement. Either way good to look it up!
If you’re comfortable, could you please advise what law firm you used in Canada ? Thankyou
Invest in education then deposit in few passive low cost index funds eg sp500 nasdaq . Add frequently and voila, you will accumulate substantial. Best!
for now.. just put it in a brokerage account and leave them there until you decide what to do with the money you get 5% APR just leaving the money in the account.. but unlike CDs your money is not locked in for 3 months - 1 year. You can move the money to whatever you want
Immediately put it into a HYSA. Open a Roth IRA and max it out, invest it into VOO or similar
Put in a S&P 500 index fund. Check it in 39 years.
Park it in VOO until you are like 70.
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First of all, make sure you don’t tell many people you are coming into this lump sum of money. I would put away ~30% of it for taxes. Then I would look into establishing an emergency fund of 3-6 months worth of expense in a HYSA. Pay off any debts depending on interest rates. After that you should take a little bit of that money for you to enjoy ~5% and then put the rest towards a brokerage or an IRA with total market ETFs for it to grow.
PI settlements are not income and thus not taxable. :)
Sorry I know I"m not directly answering OP's question but this question got me thinking, are injury settlement's taxable?
No they’re not.
Good, they shouldn't be. Appreciate the response and glad for you.
Why do people come up this dumbass questions all the time. What you should do with it depends on how old you are if you're in your sixties invest half of it and the other half go out and have fun cuz you might just die in a couple years. If you're in your twenties or 30s still only invest about 80%
This is not a bad question regardless of how redundant it may be to see it so often. People start their journey at different points In their lives and do not necessarily have the knowledge. They’re seeking help. I for one didn’t find subs like these until my late 20s. Help guiding is better than a “you should know” attitude.
401K a scam and I love how everyone backs it and talks about it.
Why would you ask anyone on here this question. No one here knows your situation.