Cash for Your Structured Settlement

If you are considering getting cash for your structured settlements you probably have a lot of questions. You are smart enough to know that there will be fees associated with getting cash for your structured settlement. Obviously the structured settlement factoring company has to make their money somewhere. And you know that by taking the money out today you are giving up your right to payments in the future. Likely, you have read some things that make you worry if it is a bad idea to get cash for your structured settlement. You wonder if you will lose too much money for the sale to be worth it. Sometimes this is true. However, if you understand how the value of money changes over time - sometimes called the Time Value of Money, then you can better make an informed decision today. So, let's look at the time value of money.

How Money's Value Changes Over Time

Economists often talk about the time value of money. This is the idea that money is worth more now than it will be in the future. It also looks at how money will grow in the future. For example, if you invest $1,000 now at a five percent interest rate, in a year you will have $1,050. You will have earned $50 in interest. So, today's $1,000 is worth $1,050 tomorrow. This is important when looking at annuities, because it means that $1,000 in the annuity today is just $ 1,000, but in ten years it could be $1,500. Of course, it depends on the rate of return that the annuity receives. If you are considering cash for your structured settlement it means that you would get less money now than you would in the long run because you have not yet earned any interest.

Inflation Impacts Value

The time value of money is also impacted by inflation. So, if you put $1,000 under your mattress, in ten years you would still have $1,000. However, given that inflation averages three percent a year, your $1,000 would be worth less than it was when you stuck it in your mattress. When you put it in your mattress milk may have cost $3.80 a gallon. But in ten years it likely costs nearly $4.00 a gallon. Now your money can buy less, meaning that its time value has gone down. If you are considering cash for your structured settlement it means that money is more valuable to you now, when things cost less. This fact can actually help to offset some of the fees that you pay.

The Global Value of Money

All of this impacts the global value of money as well. Every economy is different, and there is no way to know how one country's dollar will compare against another in the future. For example, in the 1990s one American dollar was worth more than $1.50 in Canada. As of 2011, the Canadian and American dollar were almost equal. So, if you were an American and traded your money for Canadian money in 1995, then sold it back today, you would probably make about 50% in interest. Not bad at all. When it comes to getting cash for your structured settlement there is no way to know how the global economy may impact things.

To Sell or Not to Sell

So, you are probably wondering what this all means. Is it smart to cash for your structured settlement for a lump sum now? No one knows for certain. The time value of money tells us that a dollar today is worth more than a dollar tomorrow. However, a dollar invested today can grow tomorrow. So, it is hard to say for certain. That is why your personal situation and financial need is such an important part of the decision to sell your structured settlement. Call us today and we will give you the facts you need to make the best decision possible.

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