We all know that “happily ever after” doesn't always pan out that way. Life happens and women, in particular, can have their lifestyle turned upside down when faced with divorce, widowhood or the unexpected loss of income if a spouse suddenly becomes disabled.
It's known that it's more affordable to share expenses when living with a partner than living single and that women face different financial challenges than men. Women also tend to live longer and, therefore, need a larger retirement nest egg, but they may make less money than men during their working years. On top of that, women are more likely than men to take time out of their careers to provide caregiving to children and parents.
If you throw the loss of a partner who provides income to the household on top of that, for some women it could mean a financial crisis that they never saw coming.
However, experts say that women can get back on their feet by looking at their new reality as an opportunity to claim a new sense of independence rather than seeing it as a hardship.
Practice self-care
The first step is to get through the emotional shock. Do what you need to do to take care of your mental health—and work hard to avoid letting your emotions derail you financially.
“Sometimes in these situations, people engage in emotional behaviors with financial consequences, such as revenge spending or spending money to try and make yourself feel better because you're going through this horrible thing.”- Kimberly Bridges, director of financial planning at BOK Financial®
Taking care of your mental and physical health is just as important as taking care of your finances because it all works together. Once that's in check, Bridges says it's time to assess your financial situation without your partner’s income and determine how it may change your lifestyle.
She suggests three steps to get a clear picture and regain control of your finances after a disruption.
Step 1: Review your household cash flows
Do some simple math on your income and expenses. If the numbers don't add up, then changes need to be made.
"If you're losing a source of income that was needed to fund your lifestyle expenses, you're going to need to either lower those expenses or increase your income some other way," said Bridges. That could mean taking a job if you weren't working, changing jobs for a higher salary or taking on a side hustle in addition to your current job.
If your partner's income stopped because of a disability, determine if they can receive disability or workman's comp insurance. While these means typically don't pay as much as the salary they help replace, they can still be an important part of household cash flow. However, it’s also important to take into account that your household may have higher medical expenses now because of the disability, so any new sources of income might be eaten up, Bridges cautioned.
Step 2: Create a net worth statement
If you've never created a net worth statement, it may be easier than you think.
- Write down the value of your assets—that is, everything you own—such as your home, car, and financial, investment and retirement accounts.
- List the outstanding balance of everything you owe, such as student loans, car loans, mortgages and credit card debt.
- Subtract what you owe from what you own. The answer is your net worth.
Then, review your net worth statement to determine what assets could be used to provide an income stream.
"If you have an investment portfolio, meet with an investment professional to see how much income you could get from it," she said. "But remember, it has to be sustainable. If you spend down the principal, the income will evaporate."
If you own a house or gain ownership of it through a divorce settlement, you might be able to access equity from it. But consider the consequences of taking on a home equity loan if you don’t have the means to pay it back. A better option might be to move to a less expensive home and use the difference to live on.
“If your assets aren't enough to maintain your current standard of living, you now have two options: trim your expenses or find ways to bring in more income," Bridges said.
Step 3: Update or build your financial plan
When you're suddenly thrust into re-evaluating your finances and lifestyle, you can't just live day-to-day and hope to get by. You need a plan. Bridges stresses the importance of working with a financial planner to create a plan that will give you a realistic picture of your financial situation.
“You need to have a more realistic approach than just 'I'll figure it out,' because then you're just robbing Peter to pay Paul, and next thing you know, you've spent down your assets.”- Kimberly Bridges, director of financial planning at BOK Financial®
Bridges recommends regaining control in your life by working with a professional CERTIFIED FINANCIAL PLANNER™ (CFP®), who can help you assess your total income, expenses and assets, and then run a projection to determine if any changes are needed to fund your lifestyle. Having this information can help you take back your power and feel confident in how you're moving forward.
If you don't already have a financial planning professional, you can hire a "fee-for-service" professional and pay for the plan even if you don’t have investment assets for them to manage, Bridges notes.
Finally, whichever course you choose for this new chapter in your life, it’s important to know where you now stand financially—and know where you go from here. As Bridges said, "Creating a financial plan will help you reset, face your new reality and take charge of your future."
Joining or returning to the workforce
If you’re returning to work after previously being financially supported by your partner, it could open an exciting new chapter in your life, Bridges suggested. You'll likely gain a newfound sense of independence and accomplishment.
If a logical job doesn’t come to mind, check in with your network of friends and associates on LinkedIn for prospects. You also can visit your local library or community college for ways to find a career counselor or coach who can point you in the right direction to start your job search.
Are your skills up to date? You may need to return to school or get new credentials, which could also be both a fun and challenging prospect. Work with your financial advisor to figure out how to cover educational expenses and think about how you would fit in-person or online courses into your schedule.
. © 2024 BOKF, NA.