The Implications of Raising Much-Needed Cash
Online advertisements often use the hook phrase “need cash?” to attract readers who are either in search of loans, vacation money, or funding for a new business. The truth is that working people of all ages find themselves in need of cash, the ultimate liquid asset, for a variety of reasons.
Some face unexpected medical or legal bills while others decide to take a bucket list vacation or pay for a child’s college tuition in advance. Actually, there are more reasons than you’d suspect, including the need to amass a significant sum to take advantage of a unique investment opportunity. Whatever your reason is for needing cash, it can help to become familiar with some of the smart and not-so-smart ways of doing so. Remember, not all ways of raising money are equally wise, fast, or effective.
The Implications of Raising Much-Needed Cash
Not-So-Smart: Dip into IRAs
Except in special circumstances, it’s usually a bad idea to remove money from an IRA account. Why? First, there are hefty penalties, including a 10 percent flat fine for doing so, based on the amount you withdraw. Second, after the fine, you still have to pay tax on the amount as if it were ordinary income. Add up the damage, and it’s possible you’ll dish out about 15 percent of whatever you remove. Not many emergencies are worth that hit.
Smart: Sell a Life Insurance Policy
When you check out the website of a life settlement exchange, you can really make the most of your policy in terms of cash value. In a life settlement, you get a lump sum of cash that’s usually greater than the cash surrender value of the coverage. What’s the fastest way to find out the basic facts about this technique? Simply use an online calculator to see if you quality to sell the policy and what your total payout might be. Selling a policy, you don’t need is a smart and efficient way of raising cash for an emergency, necessity, or personal indulgence.
Good: Sell the Second Car
If your garage is currently serving as a storage area for a working vehicle that you rarely, if ever, drive, sell the thing and pocket some cold cash. Second cars make sense only if you use them regularly, and can’t get by with one vehicle. But, if your family can function normally with one car, sell the extra one after spending a few dollars to fix it up and get it inspected. Remember, you’re actually losing money on the car in the form of registration and lost space in your garage.
Not-So-Good: Sell Jewelry and Family Heirlooms
It’s amazing the things you see when you visit a pawn shop. Rings, watches, wedding bands, pianos, gold coins, heirlooms, and so much more. If you’re thinking about selling or pawning diamonds or gold, think again. Unless you have no other way of acquiring emergency funds, don’t do it. Diamonds bring a tiny fraction of their value in second-hand sales, and gold jewelry does just about as poorly. If you do choose to sell such things, avoid pawn shops and work through a professional jeweler or coin dealer.