QUESTION: I was made redundant in June 2009. I was employed in the bauxite-alumina sector. I am now seeking some advice on my way forward with the money that I was given and some to come. I am 39 years old. I have two sons, one in fourth form at high school and one at preparatory school. I also assist family members financially. I have been a bee farmer since 2005. That business is doing okay.
I am the owner of two pieces of land. I already have the title for one. I was living on my own for a while but now I am living with my kids and their mom at her house which she got through the NHT. I am still in control of a rented house for which I pay $8,000 per month. This is where my bee equipment and other things are kept.
I might end up getting $6.5 million. My plan is to build my house, buy a pickup van, expand my bee-farm business, and invest in my schooling while I try to get another job.
What is the best route to achieve my goals.
- Sam
PFA: You have arrived at a very important life transition. How the rest of your life plays out could very well depend on the decisions you make here.
Your new reality is that you are out of employment now but, fortunately for you, you have your bee-farming business. You have a lump sum, with another expected, but there are several goals to be achieved.
You are already working on one of them: education. I must commend you for taking that step and wish you success. That goal would be more meaningful, though, if you decided what course you want to pursue and when. It would make it easier to draft and effect a meaningful plan.
You have indicated that you plan to build your house but have not said what timetable you have for that goal. It would be of value, too, to know the size and type house you have in mind considering the implications these have for cost. Have you considered if you want to build in phases and if you want to meet all of the cost from your own resources?
To what use would you put the pickup? Is it to be used for the convenience of travel or for your business? How much do you expect it to cost?
I see you want to expand your bee-farming business which you describe as "doing ok".
As you consider expanding it, have you considered how you can make it do better than 'okay'? It may be worth your while to see if this can be sufficiently profitable to become your main source of income. You already have five years, experience in that business and should have learned much about it.
The Ministry of Agriculture and Fisheries can give you the guidance and support you may need.
The $6.5-million redundancy payment is not insignificant but it can 'disappear like the morning mist, like dew in the morning sun' if you are not careful.
While it is a good cushion, you need to meet your current expenses from another source as much as possible. I do not know what other financial resources you have because you have not shared that information.
You have assets - land, a business, and cash. Do you have debts? If you do, have you considered reducing them or paying them off? Your present status, notwithstanding, your goal should be to continue to grow your net worth. Therefore, use your money to that end.
In the short term, of course, you should ensure there is adequate income to meet the current needs of your family and yourself. If your cash resources outside of the redundancy payment are limited, you may need to invest a portion to give you some regular cash flow.
cost and benefits
In going forward, decide what is most important to you of the goals you have set. Determine a time to realise each goal and determine its cost and benefits. Examine your resources and determine if pursuing all of these goals would compromise your financial standing.
If it would, concentrate on the most important goal first and then move to the next in order of importance if possible. Each decision you make should be on the basis of how it fits into your overall plan.
Oran A. Hall is the principal author of 'The Handbook of Personal Financial Planning'. For free counsel on money management, email: finviser.jm@gmail.com