Life after redundancy

Question: I was recently made redundant and have been unemployed for a month now. Before my redundancy proceeds run out, I need some sense of direction.

I have approximately $215,000 to my name literally. With my loss of income, my husband has been footing the bills. We have a one-year-old daughter and so we need to set aside funds for her education.

In the most basic sense, I am thinking of starting my own little business and want to know how to get the best returns from the money. Currently, it is in a regular savings account.

I have to contribute to the family's expenses and so can spare $100,000 towards any sort of investment ventures. How can I proceed? What would be my best way forward in getting returns on my money?

- SC

PFA: As you have no doubt realised, your new status brought on by your redundancy is going to cause lifestyle changes for you and your family. You have taken a significant first step by asking for help.

Your family culture, especially in regard to owning, managing, and spending money, will impact significantly on how successfully you manage your new situation. I believe your family will cope better if you have been acting as a unit in the management of your financial affairs.

It is not clear to me what approach your family, up to now, has been taking in money matters. In any event, a loss of income is bound to affect the family unit negatively. If you have not been doing so, I suggest you and your husband have a meeting of the minds on how your family deals with its new reality.

There are two ways to see the $115,000 that you will have left from the $215,000 if you go ahead with starting a business with $100,000. While this is not ideal, you could carefully use small portions of the principal monthly or weekly to supplement your husband's income.

invest your money

Alternatively, you could invest it and use the interest to supplement your husband's income. I can tell you that the sum will not be much. The regular savings account is not the place for your money. You can do better with instruments such as repurchase agreements without increasing your risk. Consult the Yellow Pages for information on a pretty wide range of investment companies. They should be able to give you advice as well.

If you have not experienced belt-tightening before, this may be it. Your family must manage its financial resources wisely. Spend only on your needs and resist any temptation to take unwise risks to make above-average returns.

With respect to saving for your child's education, it is good that you recognise that it is important to make it part of your financial programme. You do not have to start big; you will be able to increase your levels of savings when your position improves.

The sum you have to start your business is not large. Is it possible that your husband may be able to contribute to the funding of the business if he has funds that are being treated as his funds?

challenges

Whatever the business venture you choose, it should be one that offers scope for you to use your skills and strengths, that it is something you like, that you have a good market, and that it can be profitable. Do not allow sentiment to drive you. Starting a business is not usually easy, and you must be prepared for great challenges in the early days.

Help is available so do not panic. The SBAJ JAMBIC Centre at 2 Trafalgar Road offers a wide range of services to micro, small, and medium-sized businesses. Their services include training in business planning, record keeping, and getting started. Valuable advice on business, marketing, and financing is also available. With a few exceptions, there is no charge for the services.

Your current situation is temporary; bear the new inconveniences you may have to endure, as hard as that may be. All the best.

Oran A. Hall is principal author of "The Handbook of Personal Financial Planning". For free counsel on personal financial planning matters, email finviser.jm@gmail.com.