Best Financial Moves After Receiving a Personal Injury Settlement Check

Best Financial Moves After Receiving a Personal Injury Settlement Check

Just received a personal injury settlement check and not sure what to do next? You're not alone. Whether your case was handled by a national firm like Morgan & Morgan or a local legal team, getting a large lump sum from a lawsuit can feel overwhelming.

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You might be wondering:

• Should I pay off all my debt?
  
• Is this money taxable?
  
• How do I invest it wisely so I don’t blow through it?
  

Why listen to me?

I've worked closely with individuals and families who've received unexpected financial windfalls from personal injury cases. The investors and clients I serve value my guidance because it's not only practical—it's personalized. I've seen firsthand what happens when people don't plan well—and what happens when they do. My goal is to help you move from confusion to clarity so this settlement becomes a launchpad for long-term security.

Key Takeaways

• Don’t rush decisions: pause before making big financial moves
  
• Pay off high-interest debt and build an emergency fund
  
• Understand what portion of your settlement is taxable
  
• Consider using trusts to protect the funds
  
• Work with a fiduciary financial advisor to develop a long-term strategy
  
• What Should I Do First With My Settlement Check?
  

Step 1: Slow Down and Assess

In my experience, the biggest mistake people make is acting too fast. You don’t need to make every decision in the first 48 hours. Take time to understand how much you actually have after legal fees, taxes, and medical liens.

Typical deductions include:

• Attorney fees (typically 33% to 40%)
  
• Medical liens and reimbursements
  
• Legal and filing costs
  

Your "net settlement" is what you actually keep—and that’s the number you need to plan around.

Real-Life Example: Sarah’s $225,000 Settlement

Sarah, a 42-year-old dental hygienist, was injured in a car accident and received a $225,000 personal injury settlement. After attorney fees and medical expenses, she was left with $130,000. Initially tempted to buy a new car and renovate her kitchen, she paused and sought guidance. Together, we prioritized paying off her $15,000 credit card debt, building a $20,000 emergency fund, and investing $50,000 in a diversified brokerage account. Today, she’s back at work part-time, her investments are growing, and she has peace of mind.

Step 2: Pay Off the Right Debts

Not all debt is bad. But in my work with clients, I’ve found that high-interest consumer debt—like credit cards or payday loans—can quietly destroy your financial foundation.

Best debts to eliminate first:

• Credit card balances
  
• Personal loans with high rates
  
• Outstanding utility bills or collections
  
• Hold off on paying off:
  
• Low-interest student loans
  
• Mortgages (unless the peace of mind is worth more than liquidity)
  

Step 3: Build an Emergency Fund

Investors I work with often overlook this simple move: stashing 3–6 months of living expenses in a savings or money market account. But it’s a lifesaver when unexpected expenses pop up.

Emergency fund tips:

• Keep it liquid (accessible but not tempting)
  
• Use a high-yield savings account
  
• Set a monthly goal if you’re funding it gradually

Step 4: Understand Your Tax Situation

Most people assume all settlement money is tax-free. That’s not always the case.

Generally NOT taxable:

Compensation for physical injuries or illness

May BE taxable:

Punitive damages

Lost wages

Interest on the settlement

Tip: Work with a CPA who understands settlement tax rules to avoid surprise tax bills.

Step 5: Protect the Money from Life’s Curveballs

In my experience, people often forget how vulnerable new money can be. One car accident, lawsuit, or financial mistake could eat away your settlement.

Consider these protection tools:

This is especially important if your injury prevents you from working long-term.

Step 6: Invest for the Future You Want

Once your foundation is solid, investing becomes the engine for future growth.

Smart options to consider:

• Roth IRA or Traditional IRA (2025 limit: $7,000 or $8,000 if 50+)
  
• Solo 401(k) if you start self-employment or side work (limit: $69,000 in 2025 with catch-up)
  
• Brokerage account for flexible, long-term growth
  

In my experience, those who create a vision for their future are more likely to stick with a solid investment strategy.

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Conclusion

Receiving a personal injury settlement is a life-changing moment. But it doesn’t guarantee financial peace—that part takes planning. From settling debts and understanding taxes, to building a financial safety net and growing your wealth for the long term, the best thing you can do is be intentional.

You’ve already won the legal battle. Now it’s time to win the financial one.

Don’t go it alone. Connect with a financial advisor who understands the unique complexities of personal injury settlements and can help you turn this check into lasting confidence.

FAQs

What kind of financial advisor should I talk to?

Look for a fiduciary advisor who has experience helping clients manage lawsuit settlements. Fiduciaries are legally obligated to put your interests first.

Can I lose government benefits if I spend this money wrong?

Yes. If you receive Medicaid or SSI, a sudden lump sum can disqualify you. A personal injury trust can help protect eligibility.

Should I give some of my settlement to family or friends?

Only after you’ve taken care of your future. It’s tempting to share the money, but make sure your own long-term stability comes first.

Disclaimer: Case studies are hypothetical and do not relate to an actual client of Lock Wealth Management. Clients or potential clients should not interpret any part of the content as a guarantee of achieving similar results or satisfaction if they engage Lock Wealth Management for investment advisory services.