Policy payout: what should I do?

Dec 20 2012 07:33
An entrepreneur wants to know what to do with his policy payout. A Fin24 user writes:

I am a 39-year-old business owner and recently had a policy payout - a cash amount of R65 000.

My question: do I reinvest the amount somewhere else, buy something like unit trusts etc, use it to buy some shares or pay off my credit card and other accounts/cards, the total amounting to more or less the above-mentioned amount?

Christo Botes, executive director at Business Partners, answers:

You are a privileged business owner to have limited debt.

I assume that the business does not need any capital injection to expand, and that the cash flow generated from the business is adequate to pay the day to day expenses and suppliers of your business.

I also assume that the R65 000 policy payout was made to you in your personal capacity outside the business.

You are still relatively young and with your business being on a sound footing and able to pay you a decent salary, you can also service your personal debts such as your credit card and other accounts/cards.

Normally these cards/accounts do not bear interest if they are serviced and kept up to date every month.

I would therefore as a first choice reinvest the amount for rainy days that might come and/or for in 20 years, when you are approaching 60 and might have to start thinking of scaling down.

The type of investment depends on your risk appetite, but at your age it might be wise to be a bit more aggressive with higher growth share investments with long-term potential.

 - Fin24

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