Huge Settlement - What Now?

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
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