Settlement Coming My Way

[ComponY]

I was involved in a pretty serious accident last year, and now my attorney is going to try and settle for $125,000. He'll be taking 25%, and then obviously I'll have to pay my hospital bills. I think I'll be walking out with at least $65,000 (safe number).

I'm 21 years old, and have about $2,000 of debt on my credit. That will be my first thing to take care of. Debt. After that, I need to know what some good plans are. I don't think I'll need to pay tax on the settlement since it was a personal injury, but I need some guidance on different ways to go about this.

One of my good skills, is flipping cars. Buying, and selling for a profit. At the beginning of this year, I flipped 4 cars within a month, for a profit of $3,000. I think I'll take about $10,000 out of the settlement to flip again. I do have a full-time job that pays about $2,000 a month AFTER taxes. I just started, but it's in the IT field, and I think I'll advance quickly and be making even more money. That being said, does anyone have any suggestions on ways to invest or keep my money safe?

[snafu]

Welcome to SA I hope you've fully recovered without any long term medical problems. I wonder if 25% contingency is typical for lawyer's negotiations with insurance, no court work. Does that include his expenses?

'

does anyone have any suggestions on ways to invest or keep my money safe?

. Understand there is a level risk in any investment. Even a savings account has risk since interest rates are so low, your buying power is eroded, your money isn't growing. Any investment carries risk, bonds lose value if interest rates creeps up. The stock market is even more unpredictable.

There is a basic order to good, money management. I suggest you start with an Emergency Fund. That sum starts with $ 1,000. to cover typical challenges life throws at us. Build it to cover three months of your most basic expenses like rent, utilities, food, vehicle payments, insurance, operation etc.

2nd, even at 21 y/o it's important to take the first steps to establish a fund for retirement so far into your future. Can you tell us if your employer offers some type of retirement program? Ask if they contribute, the cost and 'vesting' rules.
This is free money you may be leaving on the table as a new employee.

A bit more information allows us to offer suggestions that best meets your long term goals.

[disneysteve]

Welcome.

I generally agree with snafu.

1. Pay off debt.
2. Set up an emergency fund. I'd recommend 6 months worth of living expenses.
3. Fully fund your 2016 Roth IRA ($5,500).
4. Set aside $5,500 to be used to fund your 2017 Roth IRA in January.
5. If your injuries will necessitate any ongoing medical care, set aside money to pay for that.

I also agree with checking out your employer's retirement plan if you haven't already done so. If they have a plan such as a 401k that offers a company match, be sure you are participating in that to the extent that you get the full match.

[ComponY]

Welcome to SA I hope you've fully recovered without any long term medical problems. I wonder if 25% contingency is typical for lawyer's negotiations with insurance, no court work. Does that include his expenses?

'. Understand there is a level risk in any investment. Even a savings account has risk since interest rates are so low, your buying power is eroded, your money isn't growing. Any investment carries risk, bonds lose value if interest rates creeps up. The stock market is even more unpredictable.

There is a basic order to good, money management. I suggest you start with an Emergency Fund. That sum starts with $ 1,000. to cover typical challenges life throws at us. Build it to cover three months of your most basic expenses like rent, utilities, food, vehicle payments, insurance, operation etc.

2nd, even at 21 y/o it's important to take the first steps to establish a fund for retirement so far into your future. Can you tell us if your employer offers some type of retirement program? Ask if they contribute, the cost and 'vesting' rules.
This is free money you may be leaving on the table as a new employee.

A bit more information allows us to offer suggestions that best meets your long term goals.

It's a family lawyer. He also helped me with my legal problems I had a few years ago. Although it was pretty serious, I'm still a well-grounded person in my head. So instead of the regular 33%, he takes 25%. As far as my job, it's literally brand new. I've been here for 3 weeks, but it's 4 of us who setup some automation systems (pricey ones). There's a ton of opportunity with the company for making money down the road, once I get everything down to a T. However, right now, there's no 401k for me or anything.


So maybe when I get everything, should I just throw it in my savings account at Wells Fargo?

[ComponY]

Welcome.

I generally agree with snafu.

1. Pay off debt.
2. Set up an emergency fund. I'd recommend 6 months worth of living expenses.
3. Fully fund your 2016 Roth IRA ($5,500).
4. Set aside $5,500 to be used to fund your 2017 Roth IRA in January.
5. If your injuries will necessitate any ongoing medical care, set aside money to pay for that.

I also agree with checking out your employer's retirement plan if you haven't already done so. If they have a plan such as a 401k that offers a company match, be sure you are participating in that to the extent that you get the full match.

I'm very sorry for my ignorance, but what's a Roth IRA? I'm also going to research it, but I always find better and real answers when I get it from someone like you (on a forum or in-person).

As far as my injuries, it's with my knee. It does hurt sometimes, but shouldn't stop me from anything major. I just don't have feeling in my knee. I most likely will never have feeling in my knee and I got lucky, cause there isn't a ton of pain that goes with it.


UPDATE: So it looks like it's obviously a retirement plan. So say I put $5,500 in the account. How does the Roth account work? Does it accumulate via interest?

[Drake3287]

And as for flipping cars. In almost every state your only allowed to sell so many vehicles per year before the DMV requires you to be a licensed by them. At that point it's almost not worth the financial gain. I think 4 per year is the norm.

My neighbor did this until the DMV called him on it and the requirements for being licensed wasn't worth it any longer.

[ComponY]

And as for flipping cars. In almost every state your only allowed to sell so many vehicles per year before the DMV requires you to be a licensed by them. At that point it's almost not worth the financial gain. I think 4 per year is the norm.

My neighbor did this until the DMV called him on it and the requirements for being licensed wasn't worth it any longer.

Yeah, here it's 3 with profit in mind. I don't mind getting a small dealers license to flip cars. I can make very good profit off of it. It's like $500 for a license, but I can make thousands. I love cars, and I think I'm good at selling/buying. Obviously it's a risk, especially with a car, but I think it's my little niche to making money.

[GoodSteward]

How confident is the lawyer about this settlement amount?

I know two people personally who were in settlement cases. One was workman's comp, and the other was a serious auto accident.

In BOTH cases the final amount was far, far less than the original amount. It seems to work just like medical prices and insurance. They submit a high number, but when they negotiate the price it is cut down 40-60% of what was submitted.

I would get an idea of what you can do, but I wouldn't count these eggs until you know for sure they are hatching.

[ComponY]

How confident is the lawyer about this settlement amount?

I know two people personally who were in settlement cases. One was workman's comp, and the other was a serious auto accident.

In BOTH cases the final amount was far, far less than the original amount. It seems to work just like medical prices and insurance. They submit a high number, but when they negotiate the price it is cut down 40-60% of what was submitted.

I would get an idea of what you can do, but I wouldn't count these eggs until you know for sure they are hatching.

Pretty confident. Either way, I'll be getting well over 65,000. So I'm just trying to think of ways to invest, rather than go on a spending spree.

[frugalNH]

On top of the great advice you've already been given, I would add, "Set aside some to begin saving for a house' to your list, should the numbers allow. Maybe it's not on your radar yet, but it might be something to consider for down the line.

[snafu]

This was posted on the SA Blog...

http://www.mrmoneymustache.com/2012/04/18/news-flash-your-debt-is-an-emergency/

Since you're in a brand new job, I hope it's ok to make some general money management suggestions. Don't wait for settlement to create your cash flow plan. It's critical to give every dollar a 'job' starting with your current net income.

If you like to read, try The Millionaire Next Door, or Automatic Millionaire...fast read that helps understand money management. They are likely available free, as an e-book from your library

[ComponY]

Thank you guys. I just came back to the forum and saw the replies. I appreciate the help!

[disneysteve]

Thank you guys. I just came back to the forum and saw the replies. I appreciate the help!

Have you gotten the settlement yet?

[ComponY]

Have you gotten the settlement yet?

Not yet! Looks like we're going to be suing them which will probably give me much more money. They didn't want to take the amount my attorney offered. I do have permanent knee damage (saw two doctors who said the same thing), and it prevents me from doing a lot. The settlement will most likely go above $100,000 now. My attorney will again be taking 25% of whatever I get.

[DaveInPgh]

Not yet! Looks like we're going to be suing them which will probably give me much more money. They didn't want to take the amount my attorney offered. I do have permanent knee damage (saw two doctors who said the same thing), and it prevents me from doing a lot. The settlement will most likely go above $100,000 now. My attorney will again be taking 25% of whatever I get.

Considering you are involved in ongoing litigation, I would suggest you limit just how much you post about your injuries on the internet. In a prior post, you mentioned that the injury wouldn't prevent you from doing anything major. A statement that certainly helps their case not yours.

Your username appears to be pretty anonymous. However if there is a known connection between you and this username, anything you post using the name is just a simple Google search a way.