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Tips on How to Deal with Expenses Following a Car Accident

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June 12, 2020

You're probably going to be left shaken up following a car accident. The sudden impact is traumatic enough, but you might also have to deal with injuries to yourself or your passengers.

In the days and weeks that follow, though, you may have to contend with another accident-related issue. That is the expenses that can quickly pile up as you try to put the pieces back together.

Here are tips on how you can deal with expenses after a car accident.

You Can Use Your Nest Egg

What you are going through isn't unique. There are six million car accidents every year in America. They can happen:

  • On your way to or from work
  • When you're going to the grocery store, or coming back from it
  • When you're going to a restaurant
  • On your way to visit relatives or friends

Once the smoke has cleared, you might have to pay for damages to the vehicle. You could also have to pay for medical bills if there's something that your insurance doesn't cover. Another possibility is that you'll have a settlement against you, and you'll have to come up with the money.

You might have to use a nest egg or rainy-day fund if you have one. You probably don't want to dip into that money, as you might have been saving it for retirement or a vacation. Still, you now have an urgent need for it, and you may have no better alternative.

You Can Use Money from Your IRA or 401K

There are also retirement accounts that you might have that you could dip into if you have an urgent need following a car accident. Those might include:

Since that is money that you were saving for retirement, you will have to pay the penalty on it. It's not an ideal situation, but again, if you don't have better alternatives, like ready cash in a savings or checking account, this might be your most viable option.

You Can Sell Some Stock

You also might have some money invested in the stock market. The best financial plans involve a diversified portfolio, and you may have some stock in your company that your job gave you as a perk.

Selling it and using that money to pay for car-accident related bills will hurt your long-term financial prospects, but it's all about priorities. You might want that money for the future, but you need it urgently now, as liquidity is what it will take to handle the problem as bills pile up.

You Might Have to Cash in Your CDs

Like 401Ks and IRAs, the intention with certificates of deposit is to make interest money on top of the principle. You don't want to cash in a CD before it matures, but if you need that money following a car accident, this might be another option.

You'll have to deal with a small penalty, but if your CD was close to maturity, then you'll still get some of the interest that you're due. At the very least, you'll have the CD's principle worth amount. You can immediately use that money to pay off medical bills, car repair bills, etc.

You Can Borrow Money from a Friend or Relative

It's almost always preferable to use your resources to pay for bills after a car crash. However, if you don't have the ability to do so, you might consider asking a friend or relative to borrow some money until you can pay them back.

If they have the money to lend, they might be willing to help, especially if you agree to pay interest. This is likely a better option than going to a bank or credit union. These entities will almost certainly charge you a higher interest rate if you borrow money from them.

If you go this route, you may want to work out a payment plan with the relative or friend from whom you borrowed the money. This will show that you earnestly intend to pay them back.

There are also options like pawning things or selling your house if you truly have no other choice. Much depends on how much money you owe after the car accident. If you have to pay a judgment against you after a court battle, you might have to get creative and resort to several of the options we mentioned.

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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor regarding your individual situation.

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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

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