You’re on Your Own Now
Eileen St. Pierre, The Everyday Financial Planner
Life’s a journey. Sometime along the way you may find yourself having to manage your finances on your own. You may make this decision yourself or have to face it without much time to prepare. It’s important for your own (and your family’s) future to take control of your finances.
Become financially aware
You don’t need to become the next Suze Orman or Warren Buffet. Developing a positive attitude is a good first step to becoming financially aware. Emotions can cloud our financial decisions if we let them. Seek out others in your local community who’ve gone through a similar experience. They can help you get started.
Develop a realistic spending plan
If your spouse always paid the bills, you may have no idea where your money was going. Track your monthly expenses to help you develop a realistic budget. For help use this Spending Plan Worksheet or Excel Template. In today’s economy, it does not take long to start living on the edge. Put away enough money in a savings account to be ready for emergencies.
Good credit vs. Bad credit
It’s important to start building your own credit history. Have 2 major credit cards in your own name (you really don’t need more than that). Stay clear from department store credit cards. Only charge what you can pay off each month. You can obtain a free copy of your credit report each year at http://www.annualcreditreport.com. Check for any errors and report them right away.
Update your financial records
Now that you’re on your own, you need to make sure all your assets are in your own name. Consult a lawyer if necessary. Here’s a checklist of other items to consider:
- List all your assets and liabilities (e.g. mortgage and car loan) with account numbers, balances, contact information, and passwords.
- Update your will and trust documents.
- Update beneficiaries on life insurance, retirement plans, investment and bank accounts.
- List all the benefits you have (including survivor benefits if applicable). If your health insurance was provided by your spouse’s employer, you can continue coverage under COBRA for 36 months due to death or divorce. You will have to pay 102% of the cost, but it’s nice to have this option.
- Your tax filing status will change. If you do not have any dependents, you will now file a single return, even if you got divorced on December 31st. If you provide more than 50% of support for a dependent child, you may be able to file as head of household. If you are widowed and maintain a home for a dependent child, you can file as a qualifying widow(er) and use married filing jointly tax rates for two tax years but only if you remain unmarried.
Remember, life’s a journey. Taking over the management of your finances will not happen overnight. You are less likely to stumble if you take a series of small steps rather than one giant leap.
Visit my Basic Financial Management page for more information.
(Thanks to Dr. Damona Doye at Oklahoma State University for help on an earlier version of this column.)