The financial crisis of 2008/2009 resulted in the collapse of large financial institutions, the collapse of house prices and a stubbornly high unemployment rate, which has left too many people without jobs and with money troubles. The Great Recession contributed to the failure of key businesses, a drop in consumer wealth estimated in the trillions of dollars, and serious shortfalls for all levels of government that has affected many of the services we used to take for granted.
In the structured settlement industry, we have also seen the effects of the financial meltdown. Over the years, we have dealt with many clients who had various reasons for selling their structured settlement payments in order to deal with problems or take advantage of opportunities.
We thought it would be interesting and useful to look back at some of our clients’ reasons for selling their structured settlement payments in 2006/2007, before the Great Recession, and do a comparison to the reasons for selling in 2010. And so we looked at a sample of our clients and their reasons for selling their structured settlement payments.
IN 2006/2007, 26% of our clients used their lump sum to buy a new home and 10% used their cash lump sum to renovate their home. In 2010, 13% of our clients used their money to renovate their home, very similar to 2006/2007. However, In 2010, only 10% of our clients used their lump sum to buy a new home, a drop of more than 60% in people using their lump sum to buy a home this year!
Paying Down Debt
We read and hear a lot about people who are paying down their debts and re-evaluating how they spend their money these days. We have seen a dramatic change in the way our clients are thinking about their debts as well. Before the Great Recession in 2006/2007, 25% of our clients sold some of their structured settlement payments to pay off debts. Our clients often use their lump sum to pay off high interest rate debt, which makes a lot of sense. And when they pay off any debt, it eases much of their financial stress and pressure, which increases their quality of life.
In 2010, we saw a dramatic increase in clients paying off their debts – 45%, or almost half of our clients, used their cash to pay off debts, which is almost double the proportion that used their lump sum to pay off debts prior to the Great Recession. Just like in 2006/2007, but even more so, this year clients are paying off high rate debt (for example, credit card rates are in the up to 20% range) and easing some of the financial pressures that they might be feeling, especially since a number of our clients have become unemployed in this recession.
Speaking of unemployment, many of our clients are using their money to pay for job and career training. In 2010, 16% of our clients are using their money to go back to school so that they can learn new skills for new careers. This is almost 3 times the 6% of clients who were doing this in 2006/2007, prior to the Great Recession! Our clients look like they are doing everything they can by using their resources and their resourcefulness to meet and deal with life’s challenges and opportunities.
Our clients’ structured settlement payments were there for them at the time of their injury, when they were vulnerable. And their structured settlement payments are there for them now, to help them deal with changes in their lives. It looks to us like our clients made the most of their structured settlement payments when they needed income more, at the time of their injury, and now our clients are making the most of their structured settlement when they need cash the most – structured settlements have been an essential part of our clients’ financial and life well being.
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