Suddenly Single: Financial Advice for Newly Widowed and Divorced Women
Women who suddenly find themselves alone, either through divorce or the death of their spouse, face some daunting financial challenges. A good client and good friend of mine lost her husband recently, so the importance of this topic is very fresh in my mind.
Of course, every woman is unique, and so she will have different needs depending upon her age, if she has children, the age of her children, whether she works, and what sort of assets she has available. Yet, all women facing widowhood or divorce have the same challenge: Closing down the financial side of their marriage. In many respects, a marriage can be considered a business entity. A joint financial partnership is being closed out, and things such as houses and bank accounts need to be separated.
Whether you are widowed or divorced, a loss is a loss. The change is going to affect you emotionally and mentally. So give yourself time to heal, putting off any big decisions until later. I sit down with my clients and go through what needs to be done immediately — notifying employers, banks, credit cards, paying bills. If it’s a divorce case, the health insurance might need to be changed. Social Security is a big issue for new widows. These are things that have to be dealt with right now, while there are other, more emotionally charged decisions — like moving to a new house — that should not be done right away.
Here are some of the biggest challenges for newly divorced or widowed women:
Being alone is perhaps the single biggest challenge. Suddenly, everything that was done together is now done by one person. There is certainly an emotional impact to this, but there is also a financial one. A woman suddenly doesn’t have a second income to draw on. Often there’s still a mortgage on the house, and the loss of that income can have a big influence on lifestyle.
Children should be a major emotional and financial focus. Children put a financial burden on the wife, not only with the loss of the second income but there also may be an increase in daycare costs. Children with a deceased parent do get Social Security up until the age of 18, which helps, but it’s still not going to be a full replacement of that second income. In a divorce, it helps establish guidelines between the parents because they’re still going to have connections for the rest of the child’s life.
In a divorce, establish financial boundaries. Sometimes a divorce means a complete severing of financial responsibilities, but most often there are financial obligations that continue on. Child support or alimony payments are two common examples, but there are often stipulations that a wife will collect on a husband’s pension when he retires. It can be challenging ensuring those financial guidelines are adhered to, because any time there is a problem, you have to go back to court again. I also firmly believe that there should be life insurance in place on the ex-husband, and the ex-wife should own it, to protect ex-wife’s financial interests. Be sure to change the beneficiaries on your insurance policies and retirement plans, if your divorce decree allows it.
Rethink your goals and priorities, then adjust your finances. Things have changed in your life. You may have new or different ideas about what you want to do and where you want to go. Sit down with your financial advisor and see what needs to be adjusted in your financial plans to realign it with new priorities. Don’t just keep things running on as “business as usual,” because business is not by any means usual.
For women reading this who are not currently a widow, a divorcee or going through divorce, there are definitely some things you can put in place now to hedge against the possibility of either of those events happening in the future. With anywhere between 42 to 50 percent of marriages ending in divorce, and women being much more likely to outlive their husbands, it makes sense for women to think proactively on this topic.
Know what your need is, and make sure you have life insurance on you and your spouse. Even if you are a stay-at-home mom, your life still has a dollar worth. The Worth for Women has a great calculator to determine the financial worth of a woman, whether she is earning a wage or not. That’s a great way to determine what kind of life insurance is needed, and it can work for the husband also. That’s a major priority whether there’s children involved or not.
Have your own 401(k) or IRA. Make sure to take advantage of your company match on your retirement contributions if you are working. If you aren’t working, you may still be entitled to have a spousal IRA.
Keep tabs on your own personal credit history. Women often fail to establish credit for themselves. Get credit cards in your own name, and once a year pull your credit report to see if everything is accurate. I just pulled my own credit report and found a mistake on it. It takes time to build up good credit in your own name, so start early and keep at it.
Make sure you have an easy-to-access emergency fund set aside. That should be a top priority for anyone. The general rule is to have six to 12 months income put away for emergencies. That doesn’t necessarily all need to be in a bank account. The cash value of a life insurance policy could count for this as well.
Make sure you have Wills and healthcare proxies in place and up-to-date. These should be updated regularly, especially after a divorce or a loss of your spouse. For healthcare proxies, hospitals will often reject older proxies, so make sure yours are relatively recent.
I hope you have found this discussion useful. It can be especially difficult emotionally and financially when a spouse dies or a marriage ends in divorce, but there are definite steps you can take and resources you can call on to help settle affairs and move on with your life.