What do you do when you receive a huge payout?

By Nonhlanhla Nxele

This is a common question when someone receives a payout because, mostly, they don't know what to do and how to manage it so it can sustain them longer. People may choose to use the funds in different ways, depending on their financial goals and priorities.

Most people are indebted due to a lack of financial knowledge and how to manage their finances. We need to move away from the "buy or borrow now and pay later behaviour." This can be changed by fostering a culture of savings and investing for the long term. Finding yourself in a situation where you have been paid a large amount of money all at once can be overwhelming without the right advice.

Firstly, it is crucial to start by assessing your current financial situation. Individuals must create a budget and financial plan that aligns with their goals and values to make the most of their compensation. If you have debt that needs to be paid off, consider starting with that. Most African people like celebrating such pay-out by doing a ceremony for their ancestors or donating to churches; this must be factored in when you are doing your budget and your wish list.

Secondly, you need to save the money for a future expense or investment before you start investing and have a clear understanding of what you want to achieve.

Are you looking for longterm growth or short-term gains? Your investment can be structured for your short-, medium- and longterm goals to sustain you for longer. Investing in a lump sum can be a smart way to grow your wealth. However, it's essential to have a solid investment plan before making any decision.

Understand your risk appetite so you know how to diversify your investments. Diversification is key to mitigating risk in investing. By spreading your money across different investments, you can reduce the impact of any investment's performance on your overall portfolio.

Keep an eye on your investments by making sure that you do the annual reviews that will give you an opportunity should you need to adjust your investments as necessary to keep your portfolio aligned with your goals.

While at it, do not lose to inflation, as it can work against your money; make sure that your investment strategy caters to it.

Lastly, protect what you have accumulated and ensure that all your plans and wishes are documented in a valid Will, which will ensure that your children or family members from whom you want to benefit can do so without any challenges.

It is crucial to speak with a certified financial planner once you have received a compensation payout because it can make a drastic difference to what you do with your lump sum when you receive it. The certified financial planner can ensure that ongoing funds are available to you, which may be necessary down the track to cover ongoing healthcare costs.