Let's hope that this has been the most difficult year that you will ever have to experience. Widows have so much to deal with, and finances are a significant cause of the fear and uncertainty that many women feel about their futures.
Each widow moves at her own pace, and it is important to postpone major decision-making until you are on a more even keel. In the event that you were not aware of your financial circumstances, let's hope that during this first year, you have successfully organized all of your family's bank accounts, Guaranteed Investment Certificates and other investments and consolidated them all for easier access and monitoring. You've been in contact with insurance companies, your husband's employer pension plan, and you've talked to the government agencies about potential benefits. You've had to move all of the real estate, money and investments into your name, and you may still be dealing with your husband's estate and taxes. It's a lot to do, and probably something you never wanted to deal with.
Maybe you have a young family to look after, or maybe you're on your own. Either way, one of the first steps in your financial education has been understanding what your family's household bills and cost of living are. Whether you are working or receiving a pension, or withdrawing money from your investments, you have a good idea of how much money is coming into your household each month. Hopefully you are not spending more than you are making.
Although you might not like to be reminded, the investment portfolio that suited you and your husband may now not be appropriate for you alone. If you've never been an investor, for the sake of the long-term health of your financial state, this is an important reason for you to find a professional. As an Investment Advisor, I can help you objectively review the investments that you have inherited and their suitability.
Now that you're on your own, have you taken the time to consider your longer-term financial goals, such as if you will be moving houses or cities? Will you be changing jobs, and what age will you be fully retiring? How much money you want to set aside for the children's/grandchildren's education? How much money will you need in your investment portfolio to live comfortably into nineties? Do you intent on passing on a portion of this money to other generations in the future? Do you wish to preserve capital as your main goal, or would you like to see a combination of preserving capital while having some growth? Or is growth your main reason for keeping an investment portfolio?
After making a list of what/who your money is there for, the second step is deciding how much risk you are willing to take, and what return on your investment you hope to achieve. Most widows will automatically answer 'none' to the risk question. However, that may not be a wise decision for all of your money, given today's historically low interest rates paid on 100%-guaranteed investments, and Canada's very high taxation rate. Working together with an investment advisor, you will be able to earmark different "pots" of money for different purposes and develop the correct asset allocation in terms of stocks, bonds, cash, and real estate, to help you realize each of your financial goals.
If you need to take money out of the portfolio on either a regular monthly or on a sporadic basis, your investment advisor will also be able to help you determine the correct withdrawal rate that will not deplete your investment portfolio too quickly. Many investment professionals use 4% as a "safe" amount to withdraw each year. This should be tested based on each person's total assets, income, expenses, age, and many other personal factors.
As you review the investment portfolio that you may have inherited from your husband, try to keep only those investments that will help you to achieve your financial goals - whether they generate a steady stream of income, help to minimize your taxes, or have good long-term growth prospects. Most widows understand that investing is an area that requires strategy and advice, combined with conservatism and practicality. Keeping a losing stock in your portfolio because you remember when you bought it makes no more sense than keeping an old dress that doesn't fit anymore, just because you remember the special event where you wore it. Here again, the objectivity of a good investment advisor will help you make wise decisions.
Even for the good quality investments that you inherited and plan to keep long-term, your portfolio should still be reviewed and rebalanced throughout the year to adjust to changing circumstances - both your own, as well as the global investment landscape.
Your personal financial plan acts as your roadmap, showing you whether your spending patterns and investment growth rates are going to take you where you want to be down the road. Make sure that you're working with an investment advisor who is proactive, takes the time to explain and show you what progress you are making towards achieving your financial goals. With your growing financial education and confidence in your ability to make smart investment choices, the future will gradually become less daunting and other life choices will become more clear to you.
If you or someone you know is recently widowed, and has questions about their financial situation & how to prioritize the decisions that lie ahead, please contact me as a resource to help you.
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