Do You Understand?

Sherman's mother-in-law shouldn't invest any of the settlement she's receiving into something that she doesn't understand.

QUESTION: Sherman’s father-in-law was killed 3 years ago in an industrial accident, and his mother-in-law is about to get $190,000. Sherman wants it to be a blessing to her, so how should she handle it? There’s a certain way to receive and use this money, says Dave … who tells it to Sherman and then walks him along from there.

ANSWER: The most important thing is that she doesn’t invest this money into something that she doesn’t understand. I don’t want her to lean so heavily on you, then hear the Chicken Littles of the world saying the sky is falling, and she freaks out. Take the money in a lump sum, assuming she can be responsible with it and not blow it all. My goal is to have her support herself. Take a little bit of this money and pay off her debt, a little bit more and set aside 3 to 6 months of expenses in an emergency fund, and invest the rest in a series of good growth stock mutual funds with long track records.

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