Alimony lump sum settlements
A question that is asked often is what happens in the case where alimony is awarded - can it be paid in one lump sum?
First, we must declare that we are not lawyers, and do not claim to be in any sense, and if such an event happens to you, we recommend that you find an expert in this area to guide you through the process.
All that being said, it’s been in our experience is that a lump sum is only awarded if the financial capacity of the person who must pay can reasonably afford it.
That is where the stickiness lies. As everything in the justice system, that determination will be done on a case by case basis.
The Rule of 72
The Rule of 72 is a formula used by investors to approximate when an investment, with a fixed annual interest rate (APR), will twofold. If you divide 72 by the APR, it’s possible to get an estimate of how many years it will take for your money to double.
|
Annual Percentage Rate
(APR) |
Rule of 72 Estimate
|
|
1
|
72.00
|
|
2
|
36.00
|
|
3
|
24.00
|
|
4
|
18.00
|
|
5
|
14.40
|
|
6
|
12.00
|
|
7
|
10.29
|
|
8
|
9.00
|
|
9
|
8.00
|
|
10
|
7.20
|
|
11
|
6.55
|
|
12
|
6.00
|
|
13
|
5.54
|
|
14
|
5.14
|
|
15
|
4.80
|
|
16
|
4.50
|
|
17
|
4.24
|
|
18
|
4.00
|
|
19
|
3.79
|
|
20
|
3.60
|
|
30
|
2.40
|
|
40
|
1.80
|
|
50
|
1.44
|
Example
You invest $5,000 at an interest rate of 6%.
72 ÷ 6 = 12
It will take 12 years for you to get $10,000 from your initial investment of $5,000 at 6% APR.
Buying a House
Buying a house is probably the most important decision any family ever makes. The process involves making a series of choices that will influence not only where you live, buy how you live and how much money you’ll have to live on at the end of the month. Whether you’re buying your first house, buying a bigger house, or considering the purchase of a vacation home, it’s important to consider the emotional and the financial implications of every decision you make along the way.
Where You Want to Live
You probably have a good idea about where you want to live—the state, the city, and the town, maybe even the neighborhood. Choosing your home’s location involves many considerations:
- Do you prefer an urban, suburban, or rural environment?
- Do you want to be close to family or work?
- Is public transportation easily accessible?
- Does the community have the stores and facilities you prefer?
- How are the local schools?
- Can you afford the property values, including taxes and insurance?
- Are the neighbors likely to be “your kind of people”?
How Much House is Affordable
Lower interest rates on mortgages and the growing availability of zero-down payment loans, and even negative equity, have made it possible for many families to buy homes they never could have afforded in the past. Unfortunately, some experts say this “creative financing” is also driving up real estate values, making families overextend themselves just to get a nice three-bedroom house in a relatively safe community.
Getting pre-qualified or pre-approved for a mortgage can help answer a big part of the financing question, because the mortgage lender will ask you a series of questions and use the information to determine how much money they’re willing to lend you. Among the things mortgage lenders consider are:
- Your credit history.
- Income and income prospects, since you’ll be paying off your mortgage for 15 to 30 years.
- Debt and other financial obligations. The more money you owe to to other creditors, the less money is left at the end of the month to pay a mortgage.
- The amount of a down payment. The more cash you put down on a house, the less money you need to borrow.
- Mortgage type, because lenders want you to be able to make monthly payments on time. They’ll tell you how much of a payment they think you can afford.
Feeling at Home in Your New House
The most important consideration in buying any house is to make sure you’re going to feel at home once you get there. If you’re struggling every month to pay the mortgage, or you’re all fighting for time in the only bathroom, you’re going to wish you could rewind the clock, do proper research, and make a better decision.
Take the time to find the right house at the right price; it’s worth the effort.
Buying a Car
The first choice most people make when they decide to get a new car is whether or not the car has to be brand new. There are many advantages to buying a pre-owned vehicle, price being chieft among them. A car’s value declines substantially over time, so buying a car that’s just a year old can slash several thousands of dollars off the purchase price.
Buying a New Car
When you buy a brand new car, you don’t have to worry about possible mistreatment from previous owners. You get to choose the options and features you want, and you get to inhale that new car smell. You also have more room to haggle with dealers, because if one dealership doesn’t meet your price, the one down the road just might.
Buying a Used Car
The main risk in buying a used car is the unknown. It’s not always easy to determine if a used car is in good shape. Once you provide the vehcile identification number, research sevices can tell you a great deal about your car’s history. Some used car dealers will also warranty used cars to protect against any hidden defects. Pricing used cars is a challenge because you have to consider the car’s history and condition, which are never the same for any two cars.
How to Save Money on Your Next Car
When buying a car, the best defense is a strong offense, which in this case is supported by all the information available on the Internet. You can learn the approximate value of any car fairly easily with a few visits to manufacturer’s websites, discount superstores, and independent car buying services, like Edmunds and Kelly Blue Book. A few hours spent entering makes, models, and options can help narrow your possible choices before you even leave the house.
After some time researching, you should focus on a few specific makes and models. Learn as much as you can about them, and make lists of the options you need, the options you want, and the options you can do without. Remember some items, like sounds systems, can be added later.
Consider All the Costs that Drive Up the Price of a Car
The car’s make and model and the options you pick all have a big impact on the overall price. But don’t forget the other costs you’l have to eventually pay, like repair and maintenance, gas, insurance, taxes, registration, and delivery costs. You may be able to afford the payments on a new SUV, but can you afford to fill it up with gas a couple times a week to meet your commute to work?
Establish the extra costs involved in purchasing a car before you make that final decision to buy. A call to your insurance agent should give you a good idea of what it will cost to insure the make and model you’re considering. Be sure to ask if adding an anti-theft system or anti-lock brakes would reduce the premiums. Then ask if you could save more with a comparable model.
Driving Off the Lot
Before you leave the dealership, you still have to sign papers and take possession of the vehicle. Be sure to read and understand everything you sign. Verify calculations and question anything that doesn’t make sense to you.
When you finally get your car, go over everything again. Ask to meet the service manager and schedule a three-month maintenance check. This is where you cash in on the dealer’s much-advertised customer service. Make sure to get what you paid for.
Your car’s value decreases the minute you drive it off the lot. Taking care of it, with regular maintenance and cautious driving, is the best way to extend the value of your purchase and prevent the purchase of another vehicle for a few more years.
Bankruptcy
Bankruptcy is a financial tool of last resort. While it may seem like an attractive way to eliminate debt, stop the harassing collection calls, and financially “start over”, declaring bankruptcy will have an impact on your life for years. It’s important to understand how bankruptcy works and what declaring bankruptcy means for your future.
Chapter 7 Bankruptcy
If you can’t pay your bills now and are not likely to earn enough income to pay them in the near future, you may be eligible for Chapter 7 bankruptcy. The laws vary in each state, but Chapter 7 usually discharges most unsecured debts, such as credit card debt and medical bills. You will still have to pay back secured debt, like the mortgage on your home or the loan on a car, if a judge decides they are exempt. Chapter 7 also does not eliminate government student loans, taxes, alimony, child support, or any debts that are the result of fraud. Other than your home and car, any personal property of value will be sold by a court-appointed trustee in order to pay your creditors as much as possible.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is available for people who are still earning income, but can’t meet their monthly debt obligations. You can’t have more than $250,000 in unsecured debt or $750,000 in secured debt to qualify for Chapter 13. The court will appoint a trustee to sort through your finances and come up with a three to five year repayment plan. Your debts aren’t forgiven, but you won’t have to sell any personal property to pay them off. Instead, your creditors agree to accept the monthly payments decided upon by the courts without charging you any additional interest. Don’t expect the court to provide you with a generous monthly allowance, though, the goal is to pay your creditors as much as possible.
How to File for Bankruptcy
Before you decide to file for bankruptcy, you should talk to an attorney, so you fully understand the process and the implications it will have on your finances. If you choose to declare bankruptcy, you’ll have to fill out legal paperwork and file it with a bankruptcy court. You’ll also owe a filing fee, an administrative fee, and your attorney’s fee. Remember, you can only declare Chapter 7 bankruptcy once every six years, so you can’t just go back to old spending habits afterward.
Life After Bankruptcy
Most people only think about the freedom they’ll feel once bankruptcy takes care of their debt. But bankruptcy follows you for the rest of your life. It stays on your credit report for up to 10 years, and can make it difficult for you to re-establish credit. Even after 10 years you may have trouble qualifying for a mortgage or car loan. You’ll have to check “yes” on every application that asks if you’ve ever declared bankruptcy, and you could be turned down for an apartment or a job as a result.
Bankruptcy provides a way out for people who cannot afford to pay off their debts, but it isn’t an end unto itself. Before you decide to declare bankruptcy, you should explore every other possible avenue for taking control of your financial situation.
Money Management
Save Money or Repay Debt?
So you have a little extra cash on hand at the end of the month—should you use it to pay down credit card debt, or add it to your savings account? The answer depends on a lot of factors unique to your personal financial situation. To make the right choice about what to do with extra money, take these following questions into consideration:
Do you have enough money set aside in case of emergency? Most financial experts recommend that you keep an “emergency fund” large enough to cover three to six months of living expenses. Your emergency fund should be kept in a savings or a money market account that you can access without penalty, but won’t be tempted to touch unless you absolutely need the money.
What’s the interest rate? Get out your statements from savings and investment accounts, as well as your credit card bills. What are the interest rates? Interest rates have plummeted over the past several years, so that many savings accounts and money market accounts are earning next to nothing. On the other hand, you may be paying interest on credit card debt as high as 20 percent. You should pay down debt with extra money, unless you can find an investment vehicle that offers a higher interest rate.
- Savings: If you put $100 in a savings account earning 1 percent interest, you’ll have $101 in a year. But you’ll owe taxes on that extra $1, so your real rate of return is actually less.
- Debt Reduction: If you pay off $100 of debt on a credit card that charges 18 percent interest, you’ll save $18 and owe $100 less.
Why not do a little of both? If you’re not sure whether to pay off debt or add to savings, why not do both? Use half your extra money to pay down the debt with the highest interest rate, and invest the other half. When it comes to your money, it doesn’t have to be all or nothing.
Debt Management
If you dread checking the mail because you feel like your credit card bills have gotten out of control, it’s time to rethink how you mange your debt.
Take Control of Your Credit Card Habit
The first step is to stop using your credit cards, so you don’t add to the amount you already owe. Cut the cards up, freeze them in a block of ice, or have a friend hide them in your house. Live on cash and carry only a debit card to get in the habit of paying for purchases immediately, instead of charging them and paying over time.
Next, take an inventory of your credit card debt. Once you know what you owe, you can make a plan to pay it all off. Collect all your monthly statements and make a list that shows:
- Your balance. This is the total amount you owe at any given time.
- Your available credit. If this amount isn’t shown on the statement, simply subtract your balance from your total credit limit.
- The annual percentage rate (APR). The APR could be as high as 24.99 percent, depending on your payment history. The higher the interest rate, the longer it takes to pay off the balance. Finance charges increase the total amount you owe every month, even if you don’t charge a cent.
- The minimum payment. Aim to pay more than the minimum amount due, or else you can expect to be paying off your debt for a long, long time.
- The payment due date. Credit card companies make a fortune off late payment charges, which can be $20 to $30 every month.
Get the Cash and Pay It All Off
If you have cash available in a savings or taxable investment account, consider using it to pay off your high-interest debt. If you’re paying 18 percent on you debt, your savings would have to earn the same return just to break even, and these days, few investments produce that kind of return.
Don’t pay off all your debt if it leaves you cash-poor. Otherwise, you’ll need to live off your credit cards, and the cycle of debt will start all over again. Instead, use some of your cash to pay off the first card with the highest interest. Try to reduce your total debt burden to an amount that feels more manageable, and then make a plan to pay off the remaining amount.
Make One Monthly Payment if You Have Several
If it’s hard for you to keep track of several bills each month, debt consolidation may be your solution. When you consolidate all your bills, you end up making one payment every month to cover the cost of all your bills. There are several ways to consolidate bills:
- Transfer high-interest balances to an existing card with a lower rate. If you have enough available credit on another card with a lower APR, transfer the balance from a higher-rate card. You’ll still owe the same amount, but you’ll be paying much less in interest. This way you can pay off the total amount sooner.
- Take advantage of low introductory rates on a new credit card. If all your rates are high, apply for a new card with a low introductory rate and transfer the balances to the new card. Make sure you understand how long the introductory rate lasts, because it may suddenly skyrocket after six months or a year. Don’t be afraid to negotitate for a better deal either. Some credit card companies will apply the introductory rate to balance transfers until the balance is paid off. Of course, once the new card arrives, you must promise yourself to not use it.
- Tap your home equity to pay off debt. Using a home equity loan or line of credit to pay off redit card debt is a smart move for two reasons. First, you’ll get a lower, fixed interest rate on a home equity loan or line of credit. Second, the finance charges may be tax deductible. But discipline is still the key to financial management. Once you pay off your credit cards, you have to avoid the tempatation to charge on them again.
- Apply for an unsecured debt consilidation loan. If your overall credit is good and you want to tap home equity, you may be able to get an unsecured debt consolidation loan from your bank. The loan will allow you to pay off your credit cards, lock in a much lower interest rate, and extend the repayment term. However, the interest on an unsecured loan isn’t tax deductible, and you still have to resist the urge to charge.
Retirement
Everyone knows saving for retirement is a smart investment, but how much money do you really need? The answer is different for everyone, because everyone has different plans on how to spend retirement:
Do you plan to earn income? Some people are counting down the days until their 65th birthday, when they can to walk out of the office, discard their work clothes, and begin enjoying a life of leisure. Others expect to keep working, because of a recreational or part-time job. If you don’t plan to work, you’ll need other sources of income to pay the bills.
What lifestyle do you envision for yourself? Traveling the world costs a lot more than tending to a vegetable garden. If you have expensive plans ahead of you, you’ll need to save a lot more to make them happen.
How long will your retirement last? When the retirement age was set to 65, most people didn’t expect to live past 70. Due to medical advances, life expectancy has risen over the past few years, which means you could be living off retirement savings for 35 years or more.
How Much Annual Income You’ll Need
Experts disagree about the best way to estimate retirement income needs. For a long time, financial planners said 70 percent of your pre-retirement income would be sufficient. Now many experts say you need 80 to 100 percent of your pre-retirement income, depending on your lifestyle and health status.
If you’re planning to retire in a few years, you can probably estimate how much you’ll be earning the year before you retire. If retirement is more than 10 years away, it may be harder to anticipate your pre-retirement income. There are calculators on the internet that will do the math for you, or you can multiply your current salary by one plus your average annual raise. Repeat that calculation once for every year until you retire. This calculation will estimate the amount of income you will be earning the year you retire.
For example, say you earn $35,000 today. You usually get a 3 percent raise and you plan to retire in 24 years. Multiply $35,000 by 1.03, and then multiply the result by 1.03 twenty-four times. You end up with $73,282, which is the estimate of your earnings for the year you retire.
Maximize Your Retirement Savings
Most people save for retirement in tax-advantaged accounts, such as a 401(k) or a traditional or Roth IRA. Some contributions are tax deductible, so they offer present-day tax benefits. There are tax benefits over time as well, since investments grow tax-deferred. If you’re self-employed, you may be funding a SEP-IRA, Keough, or SIMPLE plan that offers similar benefits. You may also be entitled to pension benefits from a current or previous employer.
Since there are annual limits on the amount you can contribute to tax-advantaged accounts, you should establish taxable accounts to add to your retirement savings. You won’t get any tax deductions for your contributions and you’ll pay taxes on any income or realized capital gains each year, but you’ll be adding to your retirement nest egg.
I won the Lottery, Now What?
So you’ve hit for a lottery and you want to get your money fast. Typically, you should expect to recieve payments for your winnings in about 3-5 days once all the documentation is provided to the correct institutions.
Since you now have some spendable income, many people will invest in any of the following ways:
Finance Your Business
Nothing is as satisfying as being your own boss. With a lump sum payment, you have the financial power to make it happen—start a new company, purchase an existing one, or become a franchisee.
Fund an Education
Give your child the gift of an education and start funding his or her college career. Get started with the resources you need to start a college savings plan with the money from your winnings.
Buy a New House
There’s no better time than now to buy your own house or purchase investment property. Use the money from your payments as a down payment on the full purchase price of your dream house.
Make Home Improvements
Build equity and invest in your own home by making those much needed home improvements, without taking out a loan. With money from your payments, you can build a nice deck, install a swimming pool, or re-landscape your entire yard.
Retire Early
Accelerate your payments and give yourself a well deserved break—spend more time with family and travel the country. Or use your winnings to invest in a retirement plan so when you stop working, you’ll be financially secure for life.
Pay Off Debt
Take control of your debt and use your money to pay off high-interest credit card bills or long-term loans. You could be debt-free within a month.
How Long Does it Take to Get My Money?
While processing your claim is different from each vendor, a typical process goes follows this pattern:
Day 1
Contact vendor and inform them of how much money you need and how many settlement payments you wish to sell. A Specialist works with you to create a funding plan. A contract is then created and sent to you via overnight mail.
Day 2
Receive and review your funding contract. A notary visits you to verify that all paperwork is signed and completed. Finished paperwork is sent back to the vendor.
Day 3
The vendor processes all your paperwork and prepares it to be filed with the court for approval. Your Specialist keeps you up to date on your transaction. If you need money now, a cash advance can be wired into your bank account.
3-6 weeks
The transaction is complete. A check is sent via overnight mail or cash is wired into your bank account.
Process may vary based on client’s compliance, state and local laws, and vendor’s underwriting guidelines.