The Financial Crush of Starting Over – Part 2
Last week I talked about the financial challenges of starting over after divorce. This week I want to explore some of the financial challenges of starting over after the death of a spouse. Many of the challenges will be the same such as living on one income and now having to pay all the bills based on that income. Other issues are unique to this situation such as having to pay final medical expenses, funeral expenses and settling the estate.
The reality is that we are all going to die sometime. If this happens late in life, as it will for most of us, generally it is less difficult financially than when a spouse dies prematurely. For this article, we’ll define premature death as passing away during our working years. God willing, this won’t happen to any of us. The reality is that it will for some of us. The first and most important thing to realize is that you need to take time to heal from the emotional shock and loss of your spouse. Regardless of how great (or poor) your marriage was, you still need time to heal emotionally. What does this have to do with your financial decisions? Everything!
When we are living in an emotional fog, it is difficult to make good decisions about anything, including finances. Most major financial decisions can wait for a while after the death of a spouse. It is rarely a good idea to make major decisions within the first 12 months after you’ve lost your spouse. My experience as a financial advisor taught me that you should wait for at least a year to make any important decision. This will give you time to clear your head of the emotional fog that sets in. This will also give you time to gather information about your options for retirement plans, mortgages, and other investments.
If you were both working, household income will obviously be reduced. In general, men provide a greater share of that income and if that income stream stops, there could be significant financial hardship. Most major purchases such as homes, cars, and other big ticket items are based on both incomes. Now, you have to start thinking about how to pay these bills without losing the asset. In some cases, large assets will need to be sold and downsizing needs to take place. Unfortunately, without good pre-planning, you may not have the luxury of taking any significant time to make some of these important decisions.
If there are proceeds from insurance policies, this can be used to pay final expenses such as medical and funeral costs. The remaining balance can be set aside for a period of time in a safe and conservative account such as a savings or money market account. From here, you can set up a monthly stream of income to make your regular monthly payments. Why not pay off your mortgage and any other bills right away? Because it may not be in your best interest long-term. It may eventually be best to pay of the mortgage and other bills, or your insurance proceeds could be invested to generate income that will last far into the future exceeding the temporary benefit of paying off the mortgage. The thing to remember is that the decisions made in an emotional fog are rarely your best option.
This is where having a good financial advisor, tax professional, and estate attorney come in handy. They can help you make better and more informed financial decisions. Make sure you work with them as a team and not individually. Each of your advisors has a particular specialty. It is important to make sure that each advisor knows what the others are recommending so collectively they can provide you with the best possible advice to preserve assets, minimize tax liability, and to maintain cash flow.
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About the author.
Rick Soetebier is an Author, Blogger, Speaker and Dating Coach. He has been a student of self and relationship improvement for more than 30 years. He is an astute observer of people and relationship issues. Over time and through a relationship and marriage that ended after 25 years, Rick started to develop some of the fundamental principles that are found in his book, Dating Backward: A practical guide to dating and finding your soul mate. You can benefit from his observations, education, research and personal experience by letting him help you make better relationship decisions. Date consciously and settle for nothing less than extraordinary in your next relationship.
