Divorce and widowhood are life-changing events. Consequences of decisions made at these times of emotional distress can last for decades. Recommended financial coping strategies are listed below:
* Postpone major decisions in the early stages of loss. It’s okay to take your time. Many people feel they must invest insurance or settlement proceeds immediately. Others hastily sell their home, change jobs, or make large gifts or purchases. Place money that is received in short-term CDs or a money market fund initially. Reinvest it only when you’ve had time to thoroughly explore investment options.
* If necessary, plan for a reduced income following death or divorce. Develop a spending plan based on your income and expenses alone, plus the financial needs of children. Include income provided by transferred assets and spousal support. Explore ways to increase income and reduce spending.
* Consider whether you can afford to maintain the family home. Despite a strong emotional attachment and desire to avoid disrupting children’s lives, many people simply don’t earn enough alone to finance a home that formerly required two paychecks. Base your decision on the numbers. Other options include selling the house and investing the proceeds or, in the case of divorce, selling your share or trading it for another marital asset (e.g., pension).
* Maintain health insurance following loss of spousal coverage. Under the federal COBRA law, continued group health insurance can be purchased for up to three years if your ex-spouse’s company has at least 20 employees. Purchase your own individual policy as soon as possible, however, in case you become ill (and uninsurable) during this time.
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