Waiting for a Road Accident Fund settlement is often a long and emotional journey. But now that you have finally received your pay-out, you are faced with another difficult decision: what to do with the funds to make it last. With careful money management, your needs can be taken care of for years to come.
Do not lose sight of why the money was paid over to you in the first place. It is there to compensate you for your personal injury and to help you manage the long-term difficulties associated with your situation, including medical expenses, home adaptations and the provision of an income for your dependents if you are no longer able to work.
Keep it quiet
Once people know you have received a settlement you may find that friends, ex-relations or even neighbours start asking you for a loan. This can be difficult, but remember, that the money is for you to take care of your future and what you have now has to last a lifetime.
Avoid sudden lifestyle changes
For the first six months after you have received your money, do not do anything drastic. Your pay-out marks the end of a long and emotional chapter in your life. You may not be emotionally ready to make sound financial decisions right away.
Find an independent financial adviser
It is not always easy knowing who is trying to help you and who is out to gain something from you. Choose an independent financial advisor – someone who is not a friend or a family member – to help you make decisions about your money. Make sure that he or she is registered with the appropriate financial services authority.
Use your money to make money
As an example, if you invest R500 000 for 1 year, you could earn roughly R2500 per month (at 6% interest per year) without ever needing to use your capital.
Get to understand money
Even if you are working with a financial advisor you are responsible for every decision you make. Make sure that you fully understand what this person advises you do with your money and why. You have to know where your money is going, whether you can access it when you need to, what costs you may be paying and what potential risks you may be facing.
Live within a budget
This is particularly true if you are not used to having a lot of money. It will take discipline to protect your pay-out and not to go on a spending spree.
Review your will
Regardless of any pay-out, it is always a good decision to review and revisit your will periodically.