Things happen in waves in my practice. Someone will approach me with a certain financial challenge. Within a week, another person will have almost the exact same concern. Then another.
I’ve talked many times about the large segment of my clientele that are women on their own. It was the impetus behind the book I wrote. When the Picture Changes | Matthew Moccio
I experienced another wave of inquiries recently from women who are “newly single” meaning they just lost their spouses or brought a relationship to an end. So I thought it would be a good time to outline the key points of my book. Please pass this on to anyone who could benefit from it. Contact me if you’d like a copy of my book.
If you are now living on your own, it’s very likely that your financial situation has changed. Your income, your expenses, your assets (whether it’s your investments or the equity in your home), and your plan for your financial future, have likely all changed due to the change in your relationship status. When you no longer have a spouse because they have died or because your relationship has ended, you need to take a close look at your finances and take action to ensure that you are in the strongest possible position.
1) Take Care of Yourself First
Unless something pressing arises that requires immediate attention, there is no need to feel rushed and to add more stress to your already stressful situation. Of course, your bills need to be paid on time and your taxes need to be filed. But you need to be in the right frame of mind to tackle more complex financial issues, especially if it’s new to you. Avoid making big decisions until you feel more settled. You need time to grieve and to adjust. Turn your attention to the bigger picture when you’re ready.
2) Reflect on Your New Life
Chances are, you had never thought about life under these circumstances. You probably always had a vision for your future that included your spouse. You need to take time to formulate a vision for life the way it is now. It may be too soon and that’s ok. But at some point, you’ll start to see how you spend your time, what day-to-day commitments you’ll have and where your priorities lie. It will drive your life and your lifestyle. Understanding this will help you to formulate a financial plan that supports what is important to you and is in line with your values.
3) Think twice before moving too soon
A change in a relationship will often involve a change in where you live. When relationships end, there is sometime no choice but for one or both partners to seek new accommodations. When a spouse dies, it’s often the first thing the surviving spouse considers. This is not one-size-fits-all advice. The specifics of your situation are unique. If your relationship ended, you may be eager to move so you can wipe the page clean and begin to sketch a new picture and a new life. But if your home has been the centre of your life and you’re still happy there, try to not make hasty decisions about leaving it.
4) Take Inventory
Once you feel ready to look closely at your finances and you have a clearer picture of what your new life entails, the first step is to gather information about all the things in life that involve money. It generally falls into four broad categories: Money in (what you earn); Money out (your expenses); What you own (your assets i.e investments, real estate); What you owe (mortgage, loans). Having this data available will help you sort out what you need money for and how you can ensure you’re on track to stay financially healthy.
5) Formulate a Financial Plan
Nothing can make you feel better about your financial future than organizing the information above into a long-term plan. It shows you that you’ll be ok and will relieve a lot of stress. A financial plan is a coordination of estimates and calculations that takes where you are today – the four things above – and projects them over time. Done properly and with conservative assumptions, it will take away the worry you may have felt about not having enough to last in your lifetime. A comprehensive plan also considers
your tax situation well into the future; it accounts for inflation; it analyzes risks and tests for bad times, whether in your life or financial markets; and it projects the value of your estate and things such as taxes that can eat away at it.
6) Adjust your investments
Once you have a plan, you can determine how your investments need to help deliver on that plan over time. You’ll have a goal for the return you wish to achieve and the level of risk you can afford to take. Your situation has changed so your investments may need to change too. You may also have a different investment “personality” than your spouse, so it’s important to review and adjust your investments to match your plan and your comfort level.
7) Determine your new tax reality
Your income may very well be different from when you lived with a spouse. When relationships end, support payments often begin. When spouses die, some pensions are lowered and sometimes new ones begin. And if your investments have changed or if you have money you never had before, then the income from those investments may be higher or lower than in the past. All of this means your tax return and the rate and total amount of tax you pay could have changed as well. It’s an important thing to consider and to have a handle on because it guides some of your financial choices and decisions.
8) Update your estate plan
Legal professionals will always recommend you review and revise your will and powers of attorney when major life events occur. You need to think about who will administer your estate and who will look after your affairs or your medical decisions if you’re not capable. It’s likely that a lot of time has passed since you last undertook this exercise and the stakeholders involved – children and other loved ones – are older and may include people that weren’t part of your life before or no longer are. For all these reasons and others too, it’s time to revisit this.
9) Review beneficiary designations
Many financial vehicles offer the ability to designate a beneficiary in the event of your death. This can allow for quick passage of assets to the individuals you choose and can reduce costs to your estate. This most commonly involves RRSPs, RRIFs, TFSAs, pension plans and life insurance policies. The thorough review and inventory you would have undertaken in the steps above will help you know what you have that requires an update.
10) Seek Advice
As you can see, there are a lot of important tasks involved in ensuring your financial well-being. The point of this is to make you aware of them and to get you started. It’s also to begin to build your knowledge and confidence. You can do this. But you shouldn’t do it alone and you don’t need to. You should engage trusted advisors who can guide you through this process. They will help ensure that it is done thoroughly and properly and they will do the heavy lifting. Seeking advice doesn’t hand over power to others, It empowers you.