Back when I started this blog, I had to think about who would be considered a beginning investor. Yes, those in their 20s and 30s who are just starting their careers are prime candidates. But what about women who have been married their entire adult lives and never had to primarily handle their finances? In honor of Women’s History Month, I look at how these women can both literally and figuratively get back on their feet after widowhood or divorce.
The O’Mara Law Group’s Stay-at-Home Mom’s Guide to Divorce covers how women can financially prepare for divorce and manage their finances during the process along with what the legal rights of mothers and children are. In order to financially separate from your former spouse, you must take stock of the accounts and information in your name in addition to anything not in your name that you have rights to. These include bank accounts, retirement savings accounts, tax returns, insurance coverage and Social Security materials. You should also consider any property or vehicles you share with your former spouse—and perhaps who’s going to take the nice espresso machine or the robot vacuum!
Lois Frankel, Ph.D., covered avoidable mistakes women make with money in her book “Nice Girls Don’t Get Rich.” Though some of these mistakes seemed redundant or unhelpful to me on first read, her discussion of not having investments in your name is relevant here: “You might just find it easier to comply than to make waves. Or you might be relieved that someone else is willing to handle all of these affairs for you. The fact is, there is no good reason to put joint monies or property into one partner’s name. Doing so leaves one person open to all the gain—or liability—associated with the investment.”
This advice from 2005 is still relevant today, and perhaps even more so with younger generations often running two-income households. Even if both partners aren’t bringing in the same amount of money, combining your finances and investments shows that you trust each other to spend and save wisely for your family. Where there’s no trust, there’s no relationship.
You may also need to build up your personal credit score after a divorce, especially if you have been a stay-at-home mom for a while. Besides the number of credit cards you have, your credit report will show any student, personal or auto loans in your name, your mortgage and any other type of debt. In Erin Lowry’s “Broke Millennial,” she says to “think of a strong credit score as an insurance policy for your financial life. A strong credit score proves to a lender that you’re reliable, which directly correlates to favorable loan terms.” This will also help if you need to apply for a new apartment or refinance your mortgage.
In order to be independent, you can build up your credit score by taking advantage of pay-later options like Afterpay, Klarna and PayPal Pay in 4. Most of these companies that allow you to pay later also don’t charge you interest if you pay within a certain period, meaning that you will still be spending the same amount of money whether you pay for it all when you buy it or stretch it out over four or more payments. This personally helped me to increase and maintain my good credit score before getting a real credit card.
If you have recently been widowed, there are short-term things you should focus on before moving on to long-term issues. In the first six months after losing your spouse, it’s important to build up an emergency fund to cover unexpected expenses and fuel your independence. This fund could also help to pay for any funeral costs. You will need to create a budget with just you and your needs in mind, something that will take some time to adjust to after losing your spouse.
Assess what your expenses are and the monthly amount you will need to stay financially afloat. Ensuring your mortgage and bills are paid, all financial accounts are correctly titled, beneficiary information is properly updated, taxes are covered and continuous health care coverage is maintained are all tasks that require your attention now. Further down the line, you can review your investments and change any rules according to your life stage. Decisions like buying a new house, moving to another state or changing careers should also be put off until you have had time to think through them and adapt to your new life.
If you are nearing retirement, make sure you have a plan for how you will spend it solo. This could involve moving closer to extended family so you’re not isolated, or having family come and stay with you more often since you will have more time to spend with them. Don’t be afraid to lean on family and friends during this time, especially for help with any financial hurdles. Though you shouldn’t be seeking investing advice from family, a trusted member could accompany you to meet a financial adviser or planner who can professionally help you navigate these hard times.
Take advantage of other financial resources for women. Read more about widowhood and retirement at AAII’s Retirement Investing.
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