Getting a life insurance payout can really help reduce financial stress when you’re going through the loss of someone you care about. However, the sudden inflow of money also presents its own challenges. If you’re wondering what to do with life insurance money, we help provide answers below for options and points to consider once you’ve received your payout.
What to Do With Life Insurance Money: Wait
It’s tempting to start using the payout money right away, but you’ve just experienced the loss of a loved one. As long as nothing financially serious will cause you to lose anything of value without paying for it immediately, it’s best to take a few steps back. It’s important to deal with what you’re going through on an emotional level first.
Oftentimes, it’s easy to make bad decisions when you’re going through situations like these and being patient can ensure you deal with your financial situation in the best way possible when you have a clear head.
Research your options to find out what’s best for your financial future and consider talking to a financial advisor to make the best choices for your goals and needs.
Get Out of Serious Debt
Whether you’ve been dealing with debt together or have inherited the person’s debt who passed away, using a life insurance payout to get out of serious debt is a great choice.
Some examples of debt that would be good to pay off would be student loan debt, recent serious expenses that occurred before the person passed, or credit card debt.
Alternatively, you can also set up monthly financial assistance to help with a particularly challenging mortgage or especially high bills that are now more difficult to pay.
Set Up an Emergency Fund (Or Add to an Existing One)
The worst things often happen at the least convenient times. An emergency fund is the best way to deal with the expenses that follow from an unfortunate event.
An emergency fund is just that: money that’s easy to access in the event you need it in an emergency. For example, flooding damage, car repair, or even something like a computer breaking could all be considered emergencies. These funds are easy to set up and is something everyone should have if they can afford to put the money aside to do so.
Using a portion of your life insurance payout money can be ideal to set one up if you don’t have one already or add more to one that’s already there. If you’re not sure how much to add, account for the total number of expenses you’ll have for four months without a source of income and start there. That’s just a starting point though, for those who work from contract to contract or part-time, six months to a year would be better to have in place if you can afford it.
Invest in Your Children
Invest in Your ChildrenUniversity is expensive; the average cost of just tuition alone for an undergraduate degree is around $25,800 if you’re a Canadian citizen living in Canada. That’s not including additional costs of housing, food, the internet, and so on. Helping your children secure their futures without them having to get into debt can massively help them with their financial future.
Not only that, but it ensures they only have to deal with cost-of-living expenses which are usually significantly less expensive and can more easily be paid off than tuition costs through work or bursaries.
Invest and Secure Financial Growth for You and Those You Care About
If you’re already fairly financially secure, consider investing in your future through, well, investing. If you’re wondering what to do with life insurance money this can be an especially great choice.
There are plenty of options when it comes to investing. However, because of the wealth of options, there are also plenty of nuances involved in making the right decisions to achieve your financial goals. Research and consider what financial goals you would like to accomplish by what point in time and discuss specific options with a financial advisor to get set on the right track for success.
While the loss of someone you care about is a lot to deal with, life insurance payouts give you plenty of flexibility to invest responsibly in your future. They can help you and your family avoid dealing with financial struggles (and added stress) that make daily life more challenging and set you up for a bright future.