HOW TO MANAGE LUMP SUM PAYMENTS
Not many of us are lucky enough to win the Lotto, but some of us do receive a sizable inheritance or redundancy payout at one time or another. The problem is knowing how best to handle this large sum of money, because if mismanaged, it can soon be whittled away, leaving you with nothing.
I am sure that you have heard of lotto winners who have won millions of dollars and a few years later have lost everything. Well, if you come into a large sum of money, you don’t want to be in the same boat – do you?
The solution is to ask yourself some key questions, before you start writing cheques for that brand new 4WD, enormous yacht and Jet Ski you have always wanted! Of course, it’s fine if you want to splurge a little at first, but for the bulk of the money you need to have a plan, that’s if you want to benefit from the money for the long haul and not blow it overnight.
What are your financial goals?
This is the first question you need to ask yourself – how can this money help you to achieve your financial goals? Once you know what you want to achieve, then you can start to put things in place to achieve these goals.
For example, if you have always wanted to work for yourself and open your own business, you need a solid business plan, a gap in the market and a product or service that people will buy. There is no point is going at it gung-ho and losing all your money on a business that was not thoroughly researched. You may as well have spent the money on the 4WD and Jet Ski, because at least that would have been fun!
Like most people in Australia, you will most probably want to achieve a number of different financial goals with your lump sum. For example, setting aside an emergency fund, paying off the mortgage, personal loan, car loan or credit card, taking a well-deserved break from work or a long holiday, creating an investment portfolio or topping up your super.
Your age and family circumstances will also play a part in setting your goals. For instance, a young couple might want to use some money for a deposit on their own home, buy a reliable car and set money aside for their children. An older couple who are empty nesters, might give their children money for a new home deposit, buy a 4WD and caravan for themselves, and invest the rest in their super.
The one essential step you need to take, if you don’t want to end up with nothing in a few years, is to seek professional financial advice. Someone trained in the financial world can help you to put together a solid plan to achieve your financial goals. They can even help you to sort through your wants, needs and must-haves, so that you can get the most out of your lump sum.
If you need help to achieve your financial goals, call Amanda McCall on 07 3356 6929 or complete our online enquiry form.