It can actually be overwhelming for anyone to receive a lump sum amount of money at once, and there are certain tips that you can follow which would be helpful when it comes to managing a life insurance policy payout.
What to do with lump sum life insurance payout is what most people need answers to these days. Life insurance payouts can be real lifelines for any family struggling to cope with finance, especially after losing a loved one in the family.
Insurance companies give out various payment options when it comes to life insurance death proceeds, and these offers include annuity, lump sum, installment agreements, and any other structured payment plan.
These payment plans also vary from one insurance company to another and what policy your insurance has, but the default payout plan you would find in most policies is the lump sum payment plan. Receiving such a huge amount of money can be overwhelming.
It is why you must figure out ways that you can wisely and effectively manage a lump sum amount in a life insurance payout plan, and you can trust the tips discussed below to be of help to you if you find yourself in this situation.
What To Do With Lump Sum Life Insurance Payout
Do Not Make Financial Decisions In A Hurry
One of the best things that anyone can do after receiving a lump sum amount of money from an insurance company does not hastily make financial decisions. It is very wise for that huge amount of money to be held onto for several months before coming up with a significant decision.
It would be the best period for you to let the money sit inside your account, and this is a sage move because the goal is for you to make educated and rational decisions and not make an emotional decision.
If you have this money in cash around you and not in the bank, you would be tempted to settle your pressing financial needs.
Make Use OF A High Yield Saving Account
You can also consider keeping this huge amount of money in a high yield savings account. It will help you earn more interest on the money you deposited in the account, and the interest can serve as a cash reserve where you can easily take out money to settle some unexpected financial bills.
This money kept in a high yield savings account earns interest, and the good thing is you can easily access this money or when the need arises.
Paying Off Your Debts With High Interests
If you have high-interest debt, such as debt on your credit card, you can get some money out of your lump sum money and get rid of the debt. Paying off what you are owing is actually a good thing because you are trying to free up some more cash in your budget every month so you can be able to have a financial cushion to rest on.
Depending on the situation, you can also consider paying off a mortgage debt if you do not sleep at night thinking about it. In this case, working alongside a financial professional would help.
Contact A Trusted Financial Advisor
If you want to figure out ways you can invest a lump sum of life insurance money on your own, then I can assure you that you will find it challenging, especially when you have no laid down plans already.
Hiring a financial planner is such a smart move because being the third party in the picture and based on his professionalism, he will help you make rational decisions and point out the errors in all of your thoughts. He would also provide information and ideas on how to make financial decisions.
A fiduciary financial planner is who you should consider working with. This is simply because they are ethically and legally bound to make decisions and moves th your best interests alone.
However, if you want a financial planner to work with a widower or a widow, this financial planner needs to be emotional. It also explains why it is important you interview several financial advisors so you can be able to find the one that best suits you.