Circumstances that lead you to get life insurance proceeds are not the best. Some people are so traumatized that they don’t know how to manage the insurance proceeds. It will help if you have someone, especially a family member, who can help you decide how best to handle the money.
This could mean figuring out how much money to leave in liquid assets, what debt to pay off, and setting up a budget. However, only some have someone like that. If you don’t and find yourself in a situation requiring you to manage life insurance proceeds, here are the common mistakes you should avoid at any cost.
Do Not Make Costly Investments or Put the Money Into Any Investments That Lock You In
Keep an eye out for large commissions and fees specifically. Do not put all your life insurance proceeds into an irreversible fund you cannot access. This might put you in a financial fix with no one to bail you out. Remember, you will always get time to make investment moves once you settle down and things become clearer. Consider an instance like an investment or insurance product with a huge surrender charge, i.e., what you would have to pay to get out of it, or an illiquid investment, for example, a gas and oil partnership where your money could be tied up for years.
Do Not Think You Deserve to Have Fun With The Money After What You Have Been Through
Yes, you have gone through a tough time, but that does not mean you should squander your life insurance proceeds. This includes things like extravagant vacations and shopping sprees. Address all financial concerns, pay all high-interest debt, and set up your budget before taking a break. However, sometimes a vacation is needed, and it is okay. It all depends on your financial situation. Do not jeopardize your future for short-term happiness.
Do Not Rush To Pay Off All Your Debt
When it comes to debts, be discriminating. Putting the insurance money to pay your mortgage in a separate account is highly recommended, but wait to pay off the loan. You must consider decisions; for instance, would you sell your property? This will ensure you have available funds to pay for your living expenses and any urgent issue.
What Can You Do After Getting Your Life Insurance Proceeds?
Find An Expert
Especially if you need a family member with credentials for handling finances, hire a certified financial planner skilled in handling life insurance proceeds or someone with experience consulting with people in life transitions.
But Do It Quickly
Some people tend to hire financial planners after they make financial mistakes. Many cases end up too late when the damage cannot be reversed. Find yourself a financial planner before you touch the insurance proceeds. This will give you a clean slate to start building a better future.
Focus On Immediate Needs
A financial adviser will help you assess your situation and advice you on what needs to take care of immediately. These needs could be funeral arrangements, medical bills, living expenses, and investigating Social Security. Figure out how to cover your essentials and cover that in your now and future budget.