If your spouse currently handles all of the household finances, have you ever thought about what you would do if your spouse was not there to do those tasks? People become widowed, divorced or for other reasons find that suddenly they are responsible for personal finances. What would you need to know in order to suddenly do this?
What You Don’t Know You Don’t Know
Donald Rumsfeld, during a department of defense press conference, uttered the famous quote that, “there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns—the ones we don’t know we don’t know.”
When it comes to managing money, it is both the known unknowns and the unknown unknowns that can trip up someone who is new to this. The first focus is going to be on keeping bills paid. That means doing some investigative work to find out how these were being paid. Are they being paid automatically? Manually? A check of the transactions on your different accounts can help figure out that answer.
Take Stock Of Status
Very quickly some additional questions will need to be answered. What money do I have coming in to pay for expenses? Now that I’m on my own, has that changed from when I wasn’t responsible for the money management? Are there any expenses that can go away?
According to a study performed by Brian Korb in the Journal of Financial Counseling and Planning, there are a couple of priorities for anyone who finds themselves suddenly having to learn personal finances.
First is the need to understand cash flow, or determining what money is coming in and what money is going out each month. Next is reviewing spending, particularly if the tendency is to spend more when under stress. So, a spending plan and learning to control expenses is also a good item to work on. That can start out by figuring out what the current amount being spent is, and looking to see if it is more or less than the money coming in. This is the time to decide what is really needed and what is desired but not required.
Next on the list is looking at savings and investments. If there are investments but not an investment advisor, then that is another need according to the study. Widows or widowers may receive insurance payouts which need to be invested and therefore an advisor is beneficial. Couples divorcing will likely benefit from an advisor as the assets are split up.
Once The Short-Term Is Under Control, Then The Long-Term Work Starts
For a surviving spouse this will include looking at financial goals and making sure that the day-to-day money management will support these. If there are investments being managed by a financial advisor, then this is the person who can help with those tasks. An attorney can be useful to assist with updating legal documents to make sure they are up-to-date given this life change. That can involve updating Wills, Powers of Attorney, and beneficiary designations.
For others who are on their own, this might involve working with a new financial advisor to create an initial plan with goals.
Watch Out For The Scammers
Anyone who is new to managing money can often be taken advantage of by scammers. A person just starting out is likely to take advice from any source available, and a scammer may seem like a good source initially. In addition, some scams such as overdue bills scams, cannot be identified as a scam particularly if someone is still figuring out what bills are ones that should be paid.
Thus, another aspect of money management is learning about scams and how they work so that they can be recognized right away. A trusted friend or professional can be a great resource to check in with prior to making any decisions or taking action based on emails or phone calls (or text messages).
A Key Ally In Time Of Transition
For basic skills and learning how to manage your daily finances after a sudden event, Triad Personal Paperwork Services can help bring order to what may seem like financial chaos. Daily money managers have the skills and experience to be able to quickly work with you to pull together the information you need to make decisions. We can also work with you one-on-one, at your pace, to teach the basic skills of managing money. We can also help coordinate interactions with other professionals to set you up for success going forward. Contact Us to learn more about what services we can offer reduce the stress of taking on that new money management role.