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General
Suddenly Single: Steps to Financial Fitness
By John Mikhael
Financial Advisor; Portfolio Manager, Smith Barney
No matter how well you and your spouse plan for the future, becoming suddenly single is not only emotionally challenging, but often financially challenging as well. In fact, the vast majority of women will be on their own at some point in their lives as a result of divorce or widowhood.1 What’s more, the average woman’s standard of living drops nearly 45% in the year following a divorce.2 If you are a senior citizen the effects can be particularly devastating (75% of the elderly poor in America are women3). Fortunately, there are steps you can take, regardless of your marital status, which can help you toward the road to financial fitness.
The first step is to be proactively involved with the financial side of your marriage from the very beginning. Find out your partner’s money philosophy—and share yours. Will you have joint or separate checking and savings accounts? Who will handle day-to-day money matters and who will be responsible for paying the bills? Even if it’s decided that your spouse or partner will handle the bill paying, know the account numbers and balances; know where the funds are going. Develop credit in each of your own names and discuss details such as a set amount that each of you can spend without consulting the other. Set aside time to discuss money matters on a regular basis; don’t wait until a financial crisis arises.
Develop a “life plan” that integrates your short-term and long-term dreams and goals. Think about the “essentials” such as retirement or funding your children’s higher education, “luxuries” such as a new home or a dream vacation, or even starting a family business. Review your plan periodically and make adjustments accordingly. Should your marriage end for any reason, you should be in a better position to pull together all the financial details you can about your marital assets.
When Facing A Divorce
Review your budget and determine whether you can cover monthly expenses, or find ways to cut costs. If you have children, consult your attorney to be sure that your divorce agreement spells out who will pay what portion of childcare and education costs, including higher education expenses.
If you haven’t already done so, open a checking account (check with your attorney first) and credit card solely in your name. Remember to protect yourself by having your name removed from any joint loan or credit card. By the same token, consult with your attorney before alerting any bank or brokerage account that holds joint assets to freeze those assets until a settlement or some mutual interim agreement is reached.
Understand your mortgage options and determine whether the mortgage should be in your name only or whether you should refinance.
Understand your retirement plan(s) as well as those of your partner. If you have not worked outside the home, consult with your attorney to ensure that your divorce agreement spells out your share of your partner’s retirement and how you will collect it. Also, under certain circumstances, you may be entitled to receive your spouse’s Social Security insurance benefits so check with the Social Security Administration to learn if you qualify.
If you and your spouse own a business or your spouse is a partner in a closely held business, be certain that fair value is considered in determining the “true” value of the business.
Facing Widowhood
First and foremost, take time to grieve, to reflect, and to adjust emotionally. Contact your attorney to verify that the steps being taken are consistent with your spouse’s will, particularly about funeral issues. Work with your attorney to probate the will and make sure all assets are transferred accordingly. Don’t make decisions in haste.
Evaluate your current financial situation. This should include a review of your household budget in the context of your household’s changing circumstances. (If you don’t have a budget, prepare one.)
As with a divorce, pull together all records relating to money, including investment information, bank statements, mortgage and insurance documents. Obtain copies of your credit report and make sure any errors are corrected. Change the ownership of any joint accounts to your name.
Sit down with a financial professional to review your insurance coverage and investments and re-visit your long-range plans. If you don’t have a long-term strategy, work with your financial professional to develop one. After all, you will need your assets to last as long as you do.
You don’t have to undertake this journey on your own. A financial professional can help you explore options, assess your tolerance for risk, develop an asset allocation strategy, and help diversify your investments. The best way to find a financial professional that you are comfortable with is to attend seminars or to ask trusted friends. Don’t be afraid to ask questions, check references, and examine that financial professional’s approach and philosophy. These steps are by no means exhaustive, but they are a good start.
1,2 The Answer Factory, Smarten Up, 2003.
3 U.S. Census Bureau, 2000 (most recent census information available)
Smith Barney does not provide tax or legal advice. Please consult you personal advisors for such guidance.
Smith Barney is a division of Citigroup Global Markets Inc. Member SIPC.
Women and Company is a division of Citigroup. Citigroup Global Markets Inc. and Citicorp Investment Services are subsidiaries of Citigroup Inc. Brokerage services are available though Citigroup Global Markets Inc., member NYSE/SIPC, and Citicorp Investment Services, member NASD/SIPC and an affiliate of Citibank. Women and Company is neither an investment advisor nor a broker-dealer and does not provide investment advisory or brokerage services.
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