Alone and having to manage money for the first time?
Updated: Oct 12, 2021
It can be an overwhelming shock to the system to find yourself on the other side of your 40s, living without a partner and suddenly having the responsibility of managing finances for your family for the first time. Whether it is through death of a loved one or divorce – nothing really prepares you for all the changes and losses: You may be facing;
a change of identity
the loss of future dreams
a financial loss
increased social isolation and loneliness
increased family and household responsibility
increased vulnerability to health problems.
In finding the way to a new beginning, part of the journey will be building confidence and resilience into your wealth decisions.
Paul Barrett, of Absolute Wealth Advisers specialises in helping clients manage their financial futures through these sensitive life transitions. "Many of our clients start working with us following these difficult times. They are people who suddenly find themselves with responsibility of having to manage a significant amount of money for the first time in their life. Whilst that may sound appealing, it can actually be quite daunting. Along with money can come the fear of losing it and not knowing where to put it in order to grow and preserve it for your own retirement or for your children. We understand that our client's main priority at that time is finding peace of mind that everything that needs to get done, will get done in a way that is safe and understandable. We help them simplify the complex."
If you find yourself this in position, Paul has put together a 5 point plan to get you on track for a healthy new beginning.
1. Be Aware of Your Emotions
Our emotions, particularly when heightened, can have a major impact on the decisions we make around money. Be aware to avoid these emotional mistakes:
Trying to sort out everything at once. Without proper goal setting and prioritising you risk decision fatigue and missing important options.
Rushing into changing everything without a holistic assessment of how each decision will effect your short and long term financial outcomes. You risk eliminating something that works well for you and you may incur additional costs in taxes, stamp duties etc by selling off assets without consideration.
Don't freeze. The world of finances contains so many options and so many complexities, it can be difficult to know where to start. This leads some people to avoid making any decisions for fear they will be the wrong ones. If you find yourself in this position find a good financial adviser to help manage the process to ensure you can maximise what you have today for a more secure tomorrow.
2. Create a Picture of Your Wealth
It is really important to see where you are now and once you have all of that information, start to create that new road map for you and your family. Determine what wealth you have, what may still be coming to you in the form of settlements or inheritance and where it is. Make a list of the following;
List what you own - property, bank accounts, vehicles, jewellery, art or other collectibles, shares, managed investments.
What do you owe on mortgages, credit cards and loans.
List your annual income via a salary, business dividends, rent, investments, by Family Court agreement, superannuation pensions or government income.
Sketch our ownership of any family trusts, super funds and business interests.
This process can become overwhelming and time consuming, particularly where there are many complex assets and accounts to keep track of, or if a loved one has passed and did not leave their affairs in a logical or accessible state. This is an area where financial advisers can help take over the administrative burden for you.
3. Understand Your Cashflow
Some people have wealth tied up in assets but struggle with cashflow. Having $3 million tied up in the family home won't help you pay the bills each month, so you need to make sure you are generating enough cash each month into your bank account to cover your expenses.
Make a list of your ongoing monthly expenses in one column and monthly income in the next column. Your expenses may have changed since your loss. You may be facing lower income without your spouse’s salary, or you may have some additional funds through a life insurance payout or inheritance. If your expenses outweigh your income then you have a cashflow issue and may need to dip into your capital to tide you over. You may need to make a decision around where any extra cashflow should come from.
4. Set Your Values, Goals and Priorities
In order to set a roadmap for your future you need to crystalise on paper - what's most important to you (your values) and what you want to achieve (personally and for your family).
Your VALUES may be things like:
1. Good health and mental wellness
2. Spending time together as a family
3. Pursuing my passion for art
4. Ongoing education
5. Using money to do, rather than to buy.
6. Living a life rich in experience
Your GOALS may be things like:
1. Keep an ongoing gym membership and have weekly massages
2. Set aside 10 hours a week to paint.
3. Move to a 3 bedroom apartment close to the city
4. Plan one family holiday per year
5. Support my two children to live at home through university
6. Retire by age 60 and be able to live off my investments
Once these are clear you can go about setting your priorities. What comes first? What are the non-negotiable and what needs to change in order to for out achieve this vision?
When you set your PRIORITIES, ensure the align with your values. Ask yourself;
What do you want to keep the same?
How much do you need to spend?
How much do you want to splurge?
How much can you save, and how much do you need it to grow?
Do you need help to make your money grow?
What or how much do you want to set aside for charity, your family or others?
5. Tackling the MUST-DOs
Once you have the big picture of what you have, what you care about and what you want to achieve it essential that you see to these important issues. A wealth adviser can help you make informed decisions and can relieve some of the administrative burden involved in implementation for you.
Ensure all your assets adequately insured
Ensure you are personally adequately insured – disability and health
Create a new Will to reflect your current wishes
Assess your Powers of Attorney. Ensure they are in place if you cannot act for yourself
Maximise your cash and investment income
Paul and his team at Absolute Wealth Advisers help people going through or emerging from *high net wealth divorce or inheritance who need help to simplify the complex, make sensible investment decisions in line with their values and relieve the administrative burden. Let us help map out your new beginning in a free 2 hour meeting. BOOK HERE
*Our client minimum is $10 million in assets.