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So, a friend just had a settlement that nets her around 100K after medical bills and such.
She has 45K in student loans, and outside of that no debt.
Should she use the money to pay off her student loans, and save the rest, or have it put all into an anuity. (where she'll get money out in 10 years, she's currently 24).
I'd pay off the student loan debt. Put 6mths of expenses in a money market, open and fund a ROTH and look into investing whatever is left over. Annuities often have high fees and you never know what can happen between now and 10yrs from now.
The biggest part of getting a few pennies like this... is that the majority of people do not save any of it in the right places.. they end up blowing it all.
If it were me, I would first fund the 401k/roth account (tax incentive), buy a cd or two, ladder those, at 10k each... put 1/2 of the money into a money market, and pay half of the student loan.. then each month, continue to pay on it big.. but, in the meantime, you are not going to have a friend empty handed right off the bat. The school loan does need to be paid, yet there are not serious reprecussions if it is not paid off immediately. The immediate course is to slap money into savings.
School loan debt is like a sword over the head. I would also pay that off. Take 10% for a spree, like a trip that wouldn't otherwise be taken, take 10% as a dedicated emergency fund, then diversify in investment with no more than 1/3 of the remainder in any one area.
Depends on how fast the student loan is accruing interest.
After that, tell her to put it in the safest place she can find, for a while, with immediate accessibility.
Meanwhile, she should then do some serious reading about investments and economics, learn the pitfalls and downsides of all the options, and make a choice that she is comfortable with.
Give away a couple of thousand, to people that she knows, who are in financial hardship, that can really be helped over a hump with a little bit of money. Do herself the same favor, with a couple of thousand that will make a difference in her own life.
Most important, assume there will never be another windfall like that again, it's not going to be replenished when it's gone, and think about how wonderful it feels to be economically secure.
Find a rich doctor, marry him, and that $100K turns into $1M in about three years.
"You can marry more in an hour than you can earn in a lifetime."
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