In this article, I'm going to use a hypothetical example of a 40-year-old widow who has received a R15 million life insurance payout.
She has two children, earns R55 000 per month, and has outstanding debts. We'll explore how she can allocate these funds wisely to secure both her immediate financial needs and long-term security for herself and her children.
Financial overview
> Life insurance payout: R15 million
> Monthly salary: R55 000 (from her employer)
> Mortgage balance: R3 million
> Outstanding car loan: R180 000 (on a vehicle worth R500 000); and
> Two young children
Her financial priorities.
Here's a step-by-step approach to allocating the R15 million to provide stability.
1. Settling debt: The first priority
The immediate focus should be clearing her outstanding debt to reduce monthly obligations and relieve financial stress:
> Mortgage (R3 million): Paying off the mortgage ensures that her home is fully owned, providing long-term security for her and her children without the burden of monthly mortgage repayments.
> Car loan (R180 000): Settling the car loan will further reduce financial obligations, freeing up cash flow for future needs. (The) R3.18 million will be used to pay off the mortgage and the car loan, leaving R11.82 million from the life insurance payout.
2. Setting up an emergency fund
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