Set priorities to avoid squandering property loss settlement
- Published: Tuesday, Aug. 30, 2011
CARTHAGE, Mo. – Mother Nature has not been kind to the Show-Me State this year. Many Missouri families are trying to recover from floods and tornadoes and to put the pieces of their lives back together.
As FEMA and insurance claims are paid, many families will find that they suddenly have money. That might not sound like a problem, but if you're inexperienced in dealing with large sums of money, a windfall may tempt you to make bad financial decisions, warns a University of Missouri Extension family financial education specialist.
“For some people, this can be more money than they’ve ever had at one point in time,” said Janet LaFon. “It can be tempting to spend that money on something other than what really is in the best interest of the family.”
It's important for families to separate their wants from their needs, LaFon said. “It's good to just step back and take a real hard look at what are the basic necessities of life. Of course, we've got to have food on the table, a roof over our heads, some kind of shelter, and clothing. Where the wants start creeping in is at what level we choose to meet those basic needs.”
A plan for your windfall should include long-term goals in addition to replacing things that were lost. You might want to think about a college education for your children, or it could be a good time to think about retirement planning. LaFon also suggests setting up or adding to an emergency savings fund.
As you set priorities, it’s a good idea to include the entire family, children as well as adults. “Because money is utilized by the entire family, it’s a great opportunity to use it as a learning experience for children to learn how to handle money properly,” she said.
LaFon recommends that you put your money in a safe place like a bank or credit union while you’re making your financial plans. “If you have it in a safe place, it will be a little less tempting to maybe go out and spend it on some things that are not the highest priorities for you and your family.”
It’s often human nature to see windfall money as different from money you earn, but it’s important to remember that a dollar is a dollar, and the sound financial decisions you apply to your earned income equally apply to your sudden money, she said.
Related MU Extension publications:
-“Financial Recovery and Risk Management,” https://extension2.missouri.edu/emw1022.
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