Progress is happening in Indian Country, and a growing number of Native people share a need for sound financial planning and investing tools. Whether the sources are from tribal economic development, gaming, settlements or successful career choices, money provides opportunities for individuals, families and communities. You or someone you know might have been the recipient of one or more of the following:
- Lawsuit Settlements: Over the past generation, a large number of Indian Country lawsuit settlements have resulted in significant lump-sum payouts to a wide range of Native American people. Legal settlements are not uncommon in tribal communities, and recipients of these payouts can be targets for fraud, predatory financial products and unscrupulous sales practices.
- Federal Land Acquisition: At times, the federal government has made purchases of highly fractionated interests in trust or restricted lands to consolidate those lands on behalf of tribal nations. The purchased land remains in trust for tribes to build housing, expand economic development and support other community benefits. Individual landowners who voluntarily choose to sell their interests in fractionated land receive direct payments, which can be sizeable.
- Per Capita Distributions: Some tribes pay a portion of tribal gaming profits and other revenues directly to members on a quarterly, semiannual and annual basis. For younger tribal members, these payments are often placed into minors’ trust accounts until the member reaches a certain age, often 18. Upon distribution, this payout can result in a large sum of money to a young person who might lack life experience and money management skills.
If you’re a recipient or potential recipient of this new money, the following tips can help you confidently manage this new money and avoid financial fraud.
Money Management Tips
1. View the settlement or payment as a lifelong asset. Your payment may feel like a windfall at first, but it’s meant to help you build a secure financial foundation, to supplement or sustain you or your family over your lifetime. Create a plan for how to manage these funds for the long term.
2. Organize your financial house. Gather your personal and financial documents together to assess what you have, what you owe, what type of payment you’ll receive and what other income you have to cover day-to-day expenses. Include your monthly bills, statements from your financial institutions and any loan documentation. This is also a good time to create a spending plan.
3. Pay off high-interest debt. Few money-management strategies pay off as well as, or with less risk than, paying off your high interest debt. If you can’t pay off credit card debt immediately, work out a structured plan to pay off the balance as quickly as possible.
4. Set and achieve financial goals. Identify your most important short-, medium- and long-term financial goals and start taking steps toward reaching those goals. Understanding key investment concepts including risk and diversification can help you make good financial decisions.
5. Think about whether you need help. Consider working with a financial professional, such as a broker, investment adviser, accountant, insurance agent or financial planner. Learn about the different types of investment professionals, the products and services they offer and fees they charge, and use FINRA BrokerCheck to research work background and disciplinary history.
6. Ask plenty of questions of financial professionals before using their services. For example, find out what licenses, professional qualifications or designations they have and how long they and their firm have been in business. Also ask how they get paid, such as through commissions on products you buy, a percentage of the amount of the assets that they manage, or a flat fee.
7. Protect your money from frauds and scams. Financial fraudsters set their sights on people who have money, so your payments, especially if they’re widely known, may make you a target for scams. Know the warning signs of fraud—including promises of quick profits, “guaranteed” returns or pressure to send money immediately.
8. Use caution with financial technology, or fintech, products or services. Mobile apps designed to assist individuals with investing, budgeting, borrowing and other financial needs have grown in popularity, but it’s important to practice the same due diligence and caution as you would when working with a financial professional. Evaluate whether an app suits your needs, and find out what fees and other costs you might incur. Also take steps to make sure your data is secure.
Be Careful Who You Trust
You may be tempted to invest your money in a particular investment if you hear that your friends or family—or other members of your tribe—are buying it. Be careful who you trust, including someone who may (or may claim to) share your Native American heritage. Don’t allow this shared background to give you a false sense of trust.
Do your own research to make sure the opportunity is legitimate, the person selling the investment is properly licensed and whether the opportunity is right for you and your unique financial circumstances.
When it comes to managing one-time settlements or disbursements of money, plan with a long-term horizon in mind and don’t be afraid to ask questions. After all, it’s your money.