A Firstline Securities Limited Blog by: Maxine King
At the height of one such mass retrenchment during the latter part of 2018, Firstline released an article which spoke directly to lump sum recipients, from the point of view of someone who had an identical experience years before. At its core, the article provided exactly what it promised: guidance on the best ways to effectively use this insurgence of funds.
Months have passed since that article was released, and our research has shown that for an unfortunate few, their influx of wealth has rapidly diminished. In light of this, Firstline thought it necessary to bring this article back into focus as we speak directly to any lump sum recipients out there who still have their money in hand. It’s not too late, but wisdom is definitely of the essence.
There is an old adage which states that “when one door closes, another opens”, but we often look so long and so regretfully upon the closed door that we do not see the one which has opened for us. That is indeed a truism, but we must recognise that we ourselves must open those doors to explore what is possible and available to us.
I will never forget that eventful day on September 8th, 2006, when BWIA WI Airways Limited announced that it would be shutting down on December 31stof that same year. In retrospect, it was a traumatic time of self-denial, where I continued with “business as usual” until I was jolted into full reality upon receipt of my “letter”. At that point my state of mental health traversed along the spectrum: from worry to anxiety to anger to depression…and then, to calm as December 31st approached. My thoughts were conflicting to say the least.
I had no immediate answers, so I organised a structured approach to dealing with my current and impending financial situation, once I was able to manage my mental well-being.
I researched the Income Tax Act to determine my taxation liability. My investigations revealed that sums above $300k were subject to taxation at that time, so I accounted for that to determine my net proceeds.
I must admit that I struggled with the idea of what was a priority at that point in my life cycle. I boiled it down to taking a long, hard look at my financial situation, within the context of my age, my family circumstance, and my general life goals. I laid out everything that had financial implications: my property, my savings, my investments, my income streams, my debt, my accrued liabilities, my financial commitments to my children’s education, (for example, I determined my net worth). In fact I did several iterations, including and excluding the mortgaged property, the educational commitments etc. and I came up with what I felt was a reasonable representation of my true state of financial health.
I recall that one of the EAP counsellors who was hired by the company gave advice that one should never prepay a mortgage. I did not necessarily agree as she did not explain about fixed and variable mortgages, prepayment penalties, notice periods and benchmark rates, so my approach was to look at the returns on my investments, comparing them with the interest rates on all my debt, inclusive of my long term mortgage debt.
I decided that the first debt to be repaid, was my credit card, which bore the highest interest rate: way above that of any of my returns!
The second was a consumer loan which was priced higher than my investment yields, but I kept my mortgage, because of its time to maturity, its annualised interest rate and its terms.
Certainty surrounding the closure of the company centred around the receipt of a cheque. Employment in a position befitting of my knowledge, experience and qualifications remained an unknown, therefore at the time I decided that I would put aside, based on my financial self-analysis, 6 months of mortgage and other living expenses, just in case I became unemployed or did not source any contracts to provide services.
From the onset, I knew that it would be foolish to plan for any major expenditure, and that investment was absolutely necessary. Fortunately for me, neither friends nor family came knocking on my door for loans or hand-outs.
As I went through the process of calculating debt repayment, contingencies etc., my investment sum worked itself out. At that time, my profession was primarily accounting and finance, and therefore the process of investment allocation, and general investment advice had to be sought from an expert in that core function.
I selected Firstline Securities Limited as the place to invest some of my funds along with another similar institution of solid repute. At Firstline, I was pleased with the manner in which my risk tolerance, investment horizon, expected returns, psychographic and demographic information were all used to determine the portfolio which was best for me. The quarterly statements I received were also very useful.
Twelve years of working in finance, treasury, accounting, as well as procedures and audit, brought me to the realisation that my experience and qualifications lent themselves to a new avenue of providing financial advisory, sales and investing services. I have never looked back, but ahead at what that foundation did for me in my current position.
In the final analysis however, do not forget your years of hard work and sacrifice.
It is acceptable to treat yourself and your family to a gift, a trip or something memorable as a well-deserved reward…within reason of course!