By Becki Patterson, Business Writer
Christopher Chin Loy, head of structured products and stockbrokerage services at Scotia DBG investments. - File
Not everyone who took a bet on the investment clubs has been burned, as overheard at a Kingston restaurant recently.
"I must be one of the few to get my money out in time - but now I just don't know what to do with it. What you think, man?"
Coming into a windfall of cash, by your own prudent past investment, by way of an inheritance, bonus, winning the lotto, an early voluntary separation deal (VSEP) from your employer, even a tax rebate, is enviable, but once the euphoria of having unexpected money subsides, the newly endowed will want to maximise the benefits of their new-found wealth.
fortunate circumstances
Sunday Business sought the advice of Christopher Chin Loy, vice-president of brokerage and structured products at Scotia DBG Investments, on what to do in such fortunate circumstances.
There are two key factors, said Chin Loy, that influence how the 'sudden' money should be handled - how much money one comes into, and the age of the person acquiring it.
If an inheritance befalls a younger person, say someone in the 20s, and there is not an accumulation of debt, and if the windfall is a modest sum, some kind of stock market investments is advisable.
"Real estate is another option, again depending on the amount of funds being received," added Chin Loy.
But there is also the money market, mutual funds and unit trusts.
Smaller amounts, such as what might be a bonus or tax rebate, could be applied to several things. For example, simple enjoyment: one could spend it on new things that were a bit out of reach previously - a car or home repair; or use the funds to bump up a savings account for 'rainy day' spending, such as sudden illness or unexpected job loss.
Adding to this stash could also be purposeful - saving towards your wedding, first car, or home down payment.
Finding a savings account that will give a good interest rate but still allow you quick access to your money is the key to this option.
While these options are also available to mature folks, Chin Loy feels they might be better served by "paying off all outstanding debts - beginning with the highest interest rates first".
solid options
Long-term saving of a windfall of money is also a solid option, especially if close to paying off your mortgage and your credit card debt is not looming high.
This might be the circumstance of people working many years and deciding to take their company's VSEP package, or probably like that man in the overheard conversation, someone lucky enough to have escaped the loss of a principal investment in a high-risk investment scheme.
Longer-term investing of a windfall of money may also be through a retirement savings plan.
stock market option
There is always the stock market option, even for older people with new money. It is all about risk tolerance, but just to be safe, getting the advice of a financial adviser is going to be worthwhile.
Chin Loy suggested, too, one should seek "tax-efficient investing of the funds, use of as many tax-free investment instruments, also equities and international mutual funds investments".
The long-term savings option can also be in the form of an education fund for an offspring or grandchild, even for yourself, to go back to school. If there is no need for the inherited money, it can be 'put up' in a trust fund for a minor.
One of the ways Jamaicans may not immediately consider is to distribute or donate inheritances philanthropically, that is, sharing with your favourite charity or social group.
Regardless of what you decide to do, money managers seem to agree that no matter at what stage of life you are, or how much money you unexpectedly receive, there are a few ground rules for maximising that windfall.
Do not rush into lifestyle extra-vagances, paying off debt, or any kind of investment, for that matter. Instead, take time to assess where you are, what your goals and financial needs are, and seek advice from a professional on your options. This should include an idea of what taxes you will have to pay on your windfall.
