Huge Settlement – What Now?
by Dave Ramsey

Recently, I had an accident at work and lost a couple of fingers. I was given a one-time settlement of $500,000. I’ve gotten another job since then, my wife and I are both in our thirties and we’ve got our eye on a house that appraised for $50,000. The seller is willing to take $38,000. We’ve also got three kids and about $12,000 in credit card debt. What’s the smartest way to handle this money?

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Dear Dave,

Recently, I had an accident at work and lost a couple of fingers. I was given a one-time settlement of $500,000. I’ve gotten another job since then, my wife and I are both in our thirties and we’ve got our eye on a house that appraised for $50,000. The seller is willing to take $38,000. We’ve also got three kids and about $12,000 in credit card debt. What’s the smartest way to handle this money?

Kevin

Dear Kevin,

I’m glad you’re determined to manage this money well. I’m sorry, too, that you had to suffer an injury like that. It had to be painful.

Here’s the plan. Are you ready? First, take $15,000 and set up an emergency fund in a good money market account. Life happens, and you need to be prepared. Do not touch this money except in the event of a real emergency! Next, write a check for $12,000 and get those credit sharks out of your life forever. Then, if you guys are sure that house is the one you want, I say go for it and pay cash. Did you see what happened? With just $65,000 of that money you became debt-free, you own your home AND you have a fat emergency fund in place. How cool is that?

Retirement comes next. You don’t want to work forever, so fully fund a couple of Roth IRAs for you and your wife for the rest of your lives. Also, max out three Educational Savings Accounts – one for each of your kids. This will take about $25,000 over the next two years.

Now, it’s time to have some real fun. You’ve been through a lot, so take $10,000 and just blow it. Spoil yourself and your family a little bit. You deserve it after everything that’s happened to you.

And last, find a mutual fund broker with the heart of a teacher, and invest the remaining money across four types of mutual funds – growth, growth and income, aggressive growth and international.

If you do this, Kevin, you’ll retire a very wealthy man. By the time you’re 65 you’ll have millions of dollars on your hands! You’ll be able to live like no one else AND give like no one else.

This horrible accident can be turned into a blessing – one that will impact your family and your community in great ways for years to come.

Dave

Comments on this article	ADD COMMENT
Mutual Fund Broker with a teachers heart? Posted by Brett from NH Don't buy anything from a mutual fund broker, otherwise you'll part with 5% or more of your windfall. Instead invest in NO load funds from the Vanguard Mutual Fund Company. Vanguard is the second largest mutual fund company in the world nad the low cost leader. They are organized similarly to a credit union (nonprofit). If you need financial advice find a fee only advisor. This is someone you pay directly for their advice nad don't pay commissions to. Go to NAPFA.org to find a fee only advisor in your area
Store for the Future Posted by Shirley from Arizona One of the most important thing of all is to buy a year's supply of food, a good supply of water and emergency supplies: 72 hour back-pack for each family member. Don't let your food go to waste. Learn to rotate it on a daily basis, so that it becomes a way of life. Buy a wheat grinder and grind your own wheat and bake your own bread. Good Luck and May God Bless You!
Math ?? Posted by Millie from Indiana The man who lost a couple fingers and received 50,000.00 dollars. Your math came up to over a 100,000.00? I don't understand this advise.
$500,000 settlement Posted by Karolee from Lawrence, KS I agree with David 100 percent. Invest wisely now so that you can afford to retire later on. I wish we had done more, but I am proud that most of my kids started early funds for their kids for college and for themselves. I am close to retirement and I am not sure how we will survive. We do not own our home and I do not know if we can afford it when we retire. I wish we had done more when we were younger.
Price of house? Posted by Peggy from Sandy, Utah I want to know where to find a house for that price?
No wrong math Posted by Louise from Provo, Utah Dave's math was not wrong. You mis-read the settlement amount Millie. It was $500,000 not $50,000.