Money Matters: Women, take control of your finances after divorce or death of a spouse
For most of us, men and women alike, the loss of your partner, either by choice or not, is one of life’s most difficult transitions.
It is daunting primarily because it simultaneously presents financial, social, intellectual and, most important, emotional, conflicting cross-currents that may never have been experienced before.
For instance, fear of an unknown and uncertain future is a natural and understandable emotional response, but its presence can seriously distort judgment if not recognized and checked.
At a more mundane level, there seems suddenly to appear an endless barrage of “to-do” items.
These issues can seem truly overwhelming when the individual is suddenly faced with making decisions regarding things that had been the primary responsibility of the departed spouse.
In my experience, this situation is most acute for women whose primary contribution and responsibility has been managing the household in addition to other responsibilities, often while balancing these responsibilities with their own careers and ambitions. Often, therefore, the shock of finding themselves now responsible for their financial future, and perhaps that of children, can seem truly overwhelming.
It’s no surprise, then, that people under such stress can inadvertently make decisions that set themselves on a course that can end in serious financial distress or even destruction, which will not become apparent for many years, at which time it will be too late to correct. However, such an outcome is by no means inevitable. Moreover, a person does not have to master intricate details of finance and investing. What they DO need to do is become proficient at a few basic concepts and, most important of all, have a clear sense of goals and objectives. Let’s look at how we approach this situation.
The first step is to find out what you have and get organized. Simply going through the process of gathering investment statements, insurance policies, bank accounts, loans and pensions, to name a few, and creating an inventory is your first step towards financial stability. Everyone, both singles and couples should know where and how to access their financial resources. Have a sheet that lists everything in necessary detail: e.g., locations, login information, and professional contacts. There are numerous tracking sheets, both paper and software, to help with this - find one and use it to guide you. Remember: ANY critical information that resides in ANY computer system must have multiple backups on at least two different kinds of media (e.g., a “thumb” drive and DVD data disk.) and a paper copy should be stored in a fireproof location such as a safety deposit box.
After you have gone through the process of gathering all the data, the next step is to understand how it all fits together, thereby yielding useful information. A frequently overlooked item is knowing what future financial assets you have already earned, such as Social Security and vested company pensions. During this initial organizing phase, confusion and emotions may take over and clear, purposeful decisions are not made. Take your time.
Set a budget for yourself and know where the income will come from to meet this budget. Balance short term needs with long-term requirements. For instance in a divorce, many women take keeping the home in lieu of retirement assets which they will need. This approach may be emotionally compelling at the time, but it may not be in a person’s long term best interests.
Keep in mind, that you must protect (and maybe re-establish) your name/identity. Because you are now single, many financial institutions and government agencies will need to know your updated status. These include credit bureaus, Social Security, brokerage and banking firms, and the various kinds of insurance companies . Ensure that each knows your correct name. If you decide to allow someone else to have access to any of your accounts, make sure you have a written power of attorney that legally allows such access and delineates the authority you’re giving to that person.
Obviously, planning for the future is fundamentally important. Men and women have similar needs but not necessarily of the same kind or degree. For instance: Depending on individual circumstances, income earning potential may vary greatly. It’s been my experience that this factor is more keenly felt by many women. Another factor that women need to consider is that, statistically, they live longer than men. This fact can have implications for devising plans for assisted living accommodations, for example, that may require more elaborate financial planning.
Going through this process can be intimidating; sometimes painful, and often lonely. There are professionals that can help you through this process. They do more than buy and sell securities. They are there to, first, completely understand your needs and desires. Secondly, to offer objective advice, to maintain perspective and provide the support you need to have confidence that you can pursue your goals.
Don’t jump at the first person who seems to be knowledgeable. There are many levels of professional competence in the financial services industry. Interview candidates. Get references and contact them. After all, you’re likely looking at a 20 to30 year or more planning horizon, so don’t rush. What’s the most important factor to consider, once all the incidentals have been addressed? Trust. Ultimately, you must be absolutely certain that the person you pick will unfailingly have your best interests at heart. With this you can rest easy and look forward to a happy, healthy and prosperous future.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Securities offered through LPL Financial, member FINRA/SIPC. Investment Advisory Services offered through Personal Financial Group, Inc, a registered investment advisor and separate entity from LPL.
This story was originally published April 29, 2015 at 11:39 AM.