Experts advise prioritizing debt repayment, then taking inventory of assets to make a financial plan for investment and protection against risks.
My husband passed away and I am raising my 3-year-old son alone. I received compensation from his insurance, nearly 4 billion VND. For the time being, my son and I do not need this money. I only want to use it for my son's future and only really need it if there is an accident in the family.
At first, I intended to deposit it in the bank as my husband and I had always done (we had deposited 500 million in the bank). But then again, I wanted to take a portion out to invest in finance, hoping to make a profit to take care of my children's lives in the future.
I need advice from an expert on how to divide and invest this money. Thank you!
QMai
Insurance contract of a customer in Ho Chi Minh City, February 2023. Photo: Quynh Trang
Consultant:
First of all, I would like to express my condolences to you for what you have faced and experienced. Through your question, I see that you have three concerns about using the nearly 4 billion VND insurance compensation: Should you deposit all of this money in the bank? Should you take a portion to participate in financial investment? What is the basis for making the above financial decision and how can you manage the risks that may occur?
Your concerns are based on responsibility, love, and concern for your child. I will give you actionable recommendations that you can take right now.
First, you need to prioritize paying off all debt (if any) . The first thing to do when you do not have a clear financial plan and do not have any suitable investment opportunities, you should prioritize paying off all debt (if any, especially high-interest debt) and temporarily deposit money in the bank. You can refer to traditional deposit products, allocate them into different terms so that you can flexibly withdraw them for alternative investments.
The second is to re-evaluate all your current assets . You need to re-evaluate and manage your current income and expenses, and listen to your desires. You need to focus on answering the question: What is most important to you right now? What do you need to prioritize?
The third step is to create a detailed financial plan , an asset allocation plan that ensures the financial goals you desire in the most effective way. You should set your own factors and priorities (asset diversity, risk management, cash flow, etc.). Especially in your current context, risk management for asset and cash flow protection is the most important thing now and in the future in the face of risks and losses that have been faced.
Next is to prioritize the goal of protecting both mother and child to face most unexpected risks that may occur. You need to build a financial reserve (3 to 6 months or up to 1 year of spending), build a life insurance fund, health insurance (usually the insurance premium is from 7-10% of annual income), build a study fund for your child until he/she finishes university, and a retirement fund for your mother to feel secure when she retires or stops working. The amount of these funds will depend on your expected needs and estimated future expenses.
The final step is to focus on building a portfolio of profitable assets to generate passive income by finding investment opportunities from real estate (residential land, potential project land...), gold, long-term stocks, open-end funds with good dividends or waiting for future growth. But you need to allocate the asset classes in a reasonable proportion, creating sustainable assets to increase income and assets for both mother and child.
The current economic situation is forecasted to have challenges but there are also many opportunities awaiting from many positive macro signals. Therefore, I think that the fourth quarter of 2023 and the first months of 2024 will be a good time for you to choose the right investment assets.
For those who want to invest in finance, if you do not have the knowledge and do not have an expert or knowledgeable companion by your side, I advise you not to choose the form of direct self-investment (especially speculative forms). You need to avoid speculative stocks or cryptocurrencies, speculative real estate... Speculative assets are highly risky, you need an expert or investment trust to support you to have a basis for making decisions.
Due to the lack of information about your current financial context and situation, I recommend that you first refer to the above advice and apply it flexibly to your financial picture. For a more detailed plan, you should see a financial expert.
Dao Hang
Chairman of BHM Restructuring Consulting Company
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