Most of us understand how life insurance works and the benefits of getting a payout. Besides monetary benefits, there are also intangible ones, such as the feeling of security that is needed, especially if one had just suffered the loss of a loved one.
Even then, some people may be at a loss at receiving a sudden large payout. While there is no hard and fast rule as to when and how you should spend your insurance payout, you should still weigh out the pros and cons before deciding.
In this article, we provide you with some helpful information that can guide you in making these decisions prudently.
Clearing your debts before moving forward
Start by paying any unpaid bills or big-ticket items, including your mortgage. Also take into account all future spending, including children’s education expenditure etc. As a rule, pay off bills that incur higher interests, such as credit card and other unsecured loans, before tackling the smaller ones.
Calculate your living costs
Once you have taken care of the present, it is time to look to the future and map out the likely costs you will incur in the longer run. These include taxes as well as future medical spending for you and your family.
If necessary, consider moving to a smaller property to save on recurring costs such as utilities.
Education for your child/children
Proper financial planning takes on even more important if you have children to take care of. The loss of a breadwinner, while devastating, should not equate to a disruption to your children’s education.
Taking it further
Thinking of investing and growing what you have? While there are many viable options available, choosing the right one is easier said than done. In fact, it can even be tricky and painful if you make the wrong investment decisions.
For this, always consult a qualified advisor when in doubt. He or she should then conduct a thorough evaluation of your financial goals and risk appetites before recommending the appropriate option.
More tips? We’ve listed down essential pointers about Term Life Insurance, read about it in “The Basics about Life Insurance in 3 Steps”.