By Marjorie L. Rand, CPA, CFP®, RICP®
If your husband passed away just recently, you are not alone. In the United States, there are 12 million women who have experienced this heart-breaking event and each year, 1 million women join the ranks of widowhood.
In the first stage of widowhood, while you are grieving, you may feel anxious, uncertain, and foggy. You may find it difficult and overwhelming to make financial decisions. For most widows, their husbands handled the finances and they are not as familiar with the details of investing, estate planning, taxes and insurance as their husbands were. Even if they are familiar with the finances, it’s a very difficult time to get things done. What makes matters worse, is unfortunately, widows are often taken advantage of in various ways during this vulnerable time.
Over the years, I have sadly seen grieving widows struggle through all these scenarios which is why I want to share 5 warnings for new widows to help avoid costly mistakes:
1. Don’t Make Any Major Financial Decisions Right Away
When going through the grieving process, our brains operate differently. It may be difficult to make decisions and our attention span may be short. Wait until clarity returns before making any important decisions. Delay major financial or investment decisions for a later time.
For example, when you receive a life insurance payment, put the funds in an FDIC insured money market account. It doesn’t have to be invested or spent right away no matter what anyone tells you. Give yourself time to give yourself time to evaluate how this money should best be used.
2. Beware of Wolves at Your Door
These wolves are the unscrupulous salespeople that prey on widows. One example, is pressuring widows into buying annuities that are not appropriate for them. This is a major mistake that should be avoided at all costs. Once your money is placed in an annuity, you usually cannot withdraw it for many years without a large penalty. “Advisors” who sell annuities earn a very large commission on these products and the amount of that commission is not disclosed to the buyer.
Other salespeople may try to convince you that you can double your money by investing with them. New widows can be the most vulnerable so beware of such scoundrels. If it sounds too good to be true, it probably is.
A good rule of thumb is if you don’t understand an investment, don’t buy it. For now, just focus on paying your regular bills, filing for death benefits and keeping enough cash in your bank accounts for upcoming expenses.
3. Avoid Impulsive House Decisions
Many widows feel alone in their house so they quickly sell the house to move closer to one of their children. They later realize this was a mistake because they end up missing their friends, their church and the doctors who were familiar with them.
Other widows stay in their house but immediately pay off the mortgage with the life insurance benefits. Later, they realize they needed the funds to cover living expenses or a major repair.
The best approach is to keep the cash available and your options open while you make decisions about your future.
4. Don't Let Others Take Advantage of You
Sadly, it’s not uncommon for friends and family members to take advantage of widows by asking for money. I’ve seen this happen in many different forms such as a family member asking for a “loan” that they never intend to repay, a friend who claims to have fallen on hard times just needs a little help (again and again), and the friend who wants to sit in on all meetings with your attorney for a “second set of ears.” (They are only interested in learning the details of your finances.)
These friends and family members take advantage of widows when they are in an emotionally fragile state. They know the widow is lonely and needs to be around people so they leverage your needs to their advantage.Another caveat: if you become romantically involved with someone in the future, be sure they have the right intentions. Don’t share the details of your finances with them. Widows are often approached by men looking for a “nurse with a purse.”
5. Know Your Finances
One nagging question many new widows ask is, “Do I Have Enough Money?” The only way to answer this question is by thoroughly reviewing your finances. The best time to take on this detailed task is when you are thinking more clearly and your concentration has improved.
Begin by making a list of everything you own, including real estate. Then make a list of all debts such as mortgages, car loans and credit card balances. Next, calculate your net worth by adding up the value of what you own and subtracting all debts.The next step is to make a list of your sources of income as well as a list of your regular expenses. Determine whether your expenses exceed your income. Depending on the results, you may need to make adjustments. Finally, review your investments to see whether any changes are needed.
If you feel overwhelmed by your cash flow needs or investment decisions and aren’t sure how to approach your finances, the best answer may be to find a fiduciary financial planner who has substantial experience working with widows. A fiduciary means that they will put your best interest first, and will not give you any biased advice. The financial advisor should make you feel comfortable, treat you with respect and never try to sell financial products to you.
Please know that you don’t have to do this alone. I feel honored to have been a support to many widows over the years, guiding them through and helping them find a new, safe path forward financially. If you are newly widowed, please do not hesitate to reach out to me. I’d be happy to answer any questions you may have and would love the opportunity to help you find financial peace of mind. Call me at 908-895-2406 or email me at firstname.lastname@example.org.