When you go through a life-changing event – a divorce or separation, the death of a spouse, a layoff, a major move – it can feel like your finances are in free fall. But often, getting to the point where you feel financially secure, can help you feel better about the chaos around you. I know that when I was going through my divorce, socking away every penny I could to provide the security blanket I needed.
Lisa felt the same way. Her year-and-half-journey to divorce (that many of you have followed on our blog) forced big financial decisions and events: buying a new house and a new car. All of a sudden, life was moving very, very fast. I know many of you are likely in similar situations. Let’s outline how to make a financial plan for yourself and be prepared:
Build a reserve. Having cash on hand really makes all the difference. It means you can move if you need to, put a down payment on a house, or buy a car as Lisa did. It means you have money in the bank, if you’re newly living on one income, in case you lose your job or suffer a major emergency. All of that goes a long way to helping you sleep at night after life-changing events, so put your head down and focus on building up your savings account balance. Then check it every month or so. Watching that growth will make you feel better.
Tackle the unknown. Often, no decision is the worst decision. But if you’re suddenly in charge of your complete financial picture, when previously you were sharing that burden, it can feel a bit paralyzing. Do a little research to boost your confidence, then make a decision. It may not be the perfect choice, but at least you’re moving forward. If you mess up, or change your mind, you can do something else.
Get financial help. Major life changes are a good signal that it’s time to consult with a financial advisor. He or she can look at where you stand and hold your hand as you make the aforementioned decisions. A good advisor will help you figure out how much home you can afford, if you’re moving, whether you should buy or rent; and what you can do with your assets to make you feel more secure.
Don’t be rash. In a case where you’ve received a windfall – a divorce settlement or inheritance, for instance – my best piece of advice is to sit on your hands for a while. Put it in the bank. I know it won’t earn much – barely any – interest, but it will give you time to think about what you want to do with that money, and it will keep it liquid during this tumultuous time while you’re making major decisions. Once you’ve thought it through, and perhaps met with a financial advisor, you can move it into an investment that will earn more of a return.
The most important thing is to be prepared for these life-changing events. Often times they can’t be avoided and can come out of nowhere.