By: Tricia Mulcare
After a spouse passes away or a couple divorces, the “suddenly single” spouse may find the prospect of handling finances complicated and daunting. The financial industry is full of phrases and terminology that can be confusing, and oftentimes someone else was in charge of making the financial decisions for the family. Now is the time to take control of your finances by changing your mindset around money and ensuring you have the right systems in place. For those not sure where to start, here are four steps for the suddenly single spouse.
Step One: Understand the investments in your portfolio.
Do you have bonds? Stocks? Are the stocks domestic or international companies? What percentage of your portfolio is liquid and readily available versus tied up in longer term partnerships? Do you have a long-term financial plan? If so, what are your financial goals and objectives? What assumptions have been made regarding future income, expenses and rates of return? Does your portfolio reflect the needed “mix” to meet the rate of return assumptions and ultimately your goals and objectives?
If you are answering “no” or “I don’t know” or “slow down please” to the above questions, you can begin to take control by building a team of unbiased advisors. This entails adding financial experts, including a wealth manager and CPA, who can help you understand what you are looking at.
Step Two: Find the right advisor for you.
Financial planners are not one-size-fits-all, the term can apply to a wide variety of people or to digital services called robo-advisors. Some things to consider when choosing the right advisor for you include their qualifications and standards, services offered, and compensation models (commission based, fee-based, or fee-only). See our How to Select An Advisor page (https://homrichberg.com/resources/how-to-select-an-advisor/) for more questions to consider when selecting an advisor.
Be wary of the professional who does not encourage you to ask questions. As the decision maker, it’s important to ask as many questions as needed until you understand the general asset mix of your portfolio and are able to articulate your long-term financial plan. Similar to discussing a sick child with a pediatrician, no questions should remain unanswered when discussing finances with your financial team.
Step Three: Build your financial plan.
It’s time to reevaluate and consider your goals in the short-term, mid-term, and long-term. Short-term goals (0-3 years) might include building an emergency fund, or saving for a home improvement project. Mid-term goals (3-10 years) might include saving for a vehicle, major trip, or the purchase of a home. Finally, long-term goals (10 years or more), would include things like saving for retirement, or college.
Step Four: Freeze your credit.
Freezing your credit with all three major credit agencies (Equifax, Experian, and Transunion) prevents someone else from pretending to be you and opening credit accounts in your name without your knowledge. All three agencies should be contacted separately and will ask a series of identification questions. Once frozen, you will receive a PIN that should be stored in a very safe place as it will be required when you need to temporarily thaw your credit to apply for a loan or other line of credit.
These four simple steps will give you the confidence to take control of your financial future and allow you to maintain your financial independence.