Zhooniyaa – receiving a lump sum of money

By Helen Bobiwash

Are you expecting to receive a lump sum of money?  An amount that isn’t part of your regular income?

There are many ways that a person could receive a lump sum of money. Sometimes, it happens from good luck. Perhaps you won a lottery or a local raffle.

Often, you have advance notice that you’ll be receiving it. Perhaps your employer pays a bonus if targets are met. You may file your income tax return and expect to receive a refund of income taxes that you paid.  It may also happen from unfortunate events – loss of a job, family member, vehicle or home.

The Department of Indian and Northern Affairs Canada reported that between 2007 and 2012, compensation was paid to 79,309 people in Common Experience Payments and to 37,792 people under the Independent Assessment Process.

In 2010, the Aboriginal Healing Foundation conducted a study of impacts from the Common Experience Payments.  Positive and negative impacts were reported in the study.  Positive impacts included relief from financial stress and being able to purchase items they couldn’t previously afford.  Negative impacts included self-destructive and addictive behaviours, family rifts over the distribution of money, elder abuse, and predatory behaviour of community members.

If you expect to receive a lump sum of money, how will you decide to use the money that will limit the negative impacts?

1st Priority – Think About Your Values

Give some thought to what is important to you.  The money can be a means to achieving something important.  How do you envision your life to be in a couple of years?  Do you want your health and wellness to be improved?  Do you want to have savings or have less debt?

2nd Priority – Make a Plan

Arnold Taylor is a Council member of Curve Lake First Nation.  He is 67-years-old.  He is a residential school survivor.  Mr. Taylor received a residential school settlement in 2009.  Prior to receiving his payment, Arnold made plans on how he was going to use it.

Take your time. Plan how you can use the money to accomplish something that is important to you.  Record your plan, with amounts set aside for each use.

Think about the options (listed below) to use the money.

1. Find out if you need to pay taxes on the money. If it comes from a severance or large payout from a job, you may be liable for income tax.  Figure out how much tax you can expect to pay.
2. Pay down all, or part, of the debt you owe. This frees up some of your regular income that you would normally pay toward debt.
3. Set aside an emergency fund. Taylor recommends that you put the money away when you receive it because you never know when you’ll have an emergency.   It is recommended to save three to six months of your living expenses as an emergency fund, if you can afford this.
4. Buy something that you have been unable to afford. Perhaps you’ve been holding off buying a new(er) vehicle.  A trustworthy vehicle will give you peace of mind that you won’t be stranded on the side of the road.
5. Invest in something that will generate money for you. Think about investing some money toward your retirement or in starting a business.   Taylor invested part of his residential school settlement to buy lawnmowers for his seasonal lawn care business.
6. Invest in education. Use your money to go to back to school.  Invest in your child or grandchild’s education.
7. Spend on a lifelong dream. Have you always wanted to travel or start a business?

If you aren’t sure how to use the money, use a financial advisor.  It could be a trusted friend or family member.  It may also be a financial advisor or financial planner who has professional ethics to follow.

As you decide how you want to use your money, think about whether it honours your values and what’s important in your life. In five years, will you feel good about how you used your money?

3rd Priority – Ensure the Safety of the Money

Make sure that you can receive the money and keep it safe.   If you don’t have a bank account, open one.  Deposit the money in your bank account until you start using it.  Arrange for direct deposit to avoid the chance of mail fraud.

4th Priority – Monitor Your Plan

Finally, start using your money.  Track how you really use it.  Compare it to your plan to learn how you carried it out.  This will be a lesson for the next time you receive a lump sum of money.