When Jennifer’s husband died after a battle with cancer, she found herself grieving his loss while trying to mother two college-bound daughters. She worried about how she would fund her children’s college education now that her husband was gone. Her older daughter had a scholarship to a state college, but her youngest needed to pay $80,000 per year to attend a private university. Plus, Jennifer felt stuck at a stressful, dead-end job that left little time for herself or her family. Now that she was thrust into a major life transition, Jennifer needed a plan to handle her family’s financial future.
Sometimes life doesn’t go the way you planned. It can happen suddenly, such as the death of a spouse, or over time, such as a divorce that was years in the making. The transition to being “suddenly single” presents a unique and often overwhelming set of financial challenges. There is an accessible approach to financial freedom that helps newly single adults move from emotional vulnerability to enduring financial independence, transforming grief and uncertainty into a state of control.
The traffic light method for financial transition
Whatever the reason you are “suddenly single,” it’s vital to take charge of your financial situation by following these simple steps:
- Red light. Stop. This is important. You’ve just been through a major life event. Before making any significant financial decisions, give yourself time to breathe and grieve your loss. Feeling a sense of urgency to make decisions may create more problems or leave you in a worse spot. Instead, educate yourself on the basics of personal finance and seek out credible financial resources. Community college courses, books by respected financial experts, nonprofit financial education programs, educational websites, podcasts, webinars, and workshops offered by libraries or community organizations can help build your knowledge and confidence. Don’t let anyone pressure you to make decisions before you are ready.
- Yellow light. Proceed with caution. Once you’ve had some time to move through your feelings, you can approach your finances with caution and a clear head. Gather all financial information and assemble a trustworthy financial team. Examine all income sources by verifying financial records and statements. Locate and learn about any savings accounts, trusts, assets, or retirement accounts. If your partner died, contact the insurance agents of record and begin the process of collecting life insurance benefits. If you are going through a divorce, consider updating beneficiary designations. If you have a financial advisor, discuss your short-, medium-, and long-term goals and develop a plan to accomplish them.
- Green light. Green means go. Once you have safely made it to the green light, you can move forward with your plans. Follow up with periodic financial reviews to measure progress and react as needed to other life events. After your transition, create longer-term plans for your lifestyle, education needs, and legacy goals for your family and community. As you settle into your new life, it’s critical to monitor your finances and adjust as necessary. As you move into the future, prepare for changes and contingencies.
The traffic light method creates a sensitive yet streamlined path to financial recovery after death, divorce, or other life changes. It is a smart financial move to consider additional preventive measures to better protect your financial future. One proactive approach is to set aside readily available funds to safeguard your savings against unforeseen circumstances.
The runaway money concept
Many people find themselves in situations where they need to end a bad relationship or recover financially after a spouse dies and leaves them drowning in debt. If you lack a clear understanding of your finances, learn about any debt, savings, or retirement plans you may have.
You can set yourself up for financial independence with careful planning. For many, having “runaway money” tucked away gives them a sense of security. Runaway money means establishing an easily accessible savings account that your partner can’t access. It should be enough to cover three to six months of living expenses. This fund helps ensure that you are prepared for whatever unexpected life events may come your way.
How to find a financial advisor you can trust
Finding a financial advisor to handle your future is no easy task. It’s essential to work with someone who is trustworthy and a good fit for your goals and personality. Make a list of questions and interview each potential advisor. Ask if they work with people with your income and net worth. Inquire about their experience, qualifications, and professional designations. Request references and follow up with them. Be sure to ask how they charge for their services to determine if you can afford them.
Additional questions include what they expect from you as a client and whether they have a backup team to help you if they are away or ill. If you get a bad feeling about anyone you interview, trust your gut and move on to someone else.
Rebuilding your finances after death or divorce
Jennifer found a competent financial advisor who helped her plan for her family’s future. She was able to fund her daughter’s college education and find a less stressful job. Jennifer made the best of a difficult life transition by planning well and setting goals.
Rebuilding your life after divorce or loss isn’t easy. By being prepared and finding trusted resources and advisors, you can move forward into a new, manageable, structured future. Taking small steps like these allows you to reclaim your confidence, knowing you are prepared for whatever comes next.
Disclaimer: Jeff Secord, CFP®, CAP®, is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.
Securities offered through Cetera Wealth Services, LLC, member FINRA/SIPC. Advisory Services offered through Cetera Investment Advisers LLC, a registered investment adviser. Cetera is under separate ownership from any other named entity.