With the aging of the population and the fact that a woman's life expectancy is still six years longer than a man's, the number of new widows in Canada is growing year over year. Women who have recently lost their spouse are forced to deal with changes in all areas of their lives, and they need support and financial advice to help themselves and their families adapt.
It can all be overwhelming – the grief, despair, anger and confusion. Making matters more complicated, the death of a spouse often results in a wave of new financial tasks and responsibilities. Widows may not be familiar with investing, insurance policies, taxes or estate planning because the husband may have handled all of these financial matters. Some questions you may need to ask include: how do you make wise decisions, which choices can you put off for later, where do you find the right person to help you, and what should you look for in an investment advisor and how should the relationship evolve?
Do nothing. Don't Panic. Many widows are inadvertently pressured by well-meaning friends and relatives and even advisors, to make rushed and unwise decisions, or to make changes before they are ready to do so. Although it's common to worry that your financial resources won't be enough to take care of your family, often the best thing to do is nothing at all – at least initially. Don't panic. Take some time to talk to friends and family, to think about what you need to take care of yourself and your family, and evaluate your priorities.
Mary's Story: Mary lost her husband last year, and although he had been ill for many months, it still came as a shock to her. Mary's husband had always made all of the decisions surrounding their finances and investments, and Mary was embarrassed to admit her lack of knowledge. I was introduced to Mary through a mutual friend who accompanied her to our first two meetings together. At the beginning, her friend asked most of the investment questions, while Mary listened and filled in the details about her family situation, lifestyle and priorities. Her friend was there to ask questions that Mary may not have thought of and to help Mary become more comfortable in being part of this new financial conversation. We met every month for a while, as Mary figured out her next steps, and together we began to put her financial puzzle pieces together. She contacted banks, paid bills, collected insurance money, made decisions about her husband's company pension plan, and slowly consolidated her money into one place. Our goal for the first year was for Mary to get her bearings and feel more stable in her situation. I wanted her to think in terms of maintaining a worry-free living situation, until she could truly think clearly about where she wanted to be in the future.
Each widow moves at her own pace, and it is important to postpone major decision-making until you are on a more even keel. Mary still goes through tough times, sometimes feeling angry, guilty that things didn't happen differently. However, she wants to learn more about the investment process, and to start making paced decisions about her money and her new life. As she learns and understands why some financial decisions are more appropriate for her than others, she is feeling more confident overall, understanding and believing that she is going to be alright financially and as a result, less afraid of the future.
Review your financial statements and real estate
In order to understand Mary's full financial situation, we needed to understand her assets and liabilities. First, we found statements for all of their financial products including bank accounts, Guaranteed Investment Certificates (GICs), Registered Retirement Savings Plans, Tax-Free Savings Accounts so we could speak to all the professionals who helped her husband with their financial matters. Then we created a summary of where all of the money was. Months later, Mary was still receiving "surprise" financial statements in the mail, for investment accounts that she did now know about, and needed to contact those companies for more information.
Understanding your Cash flow: The Ins and Outs
One of our early conversations was about Mary's cash flow needs - that is, how much money comes into the household and what goes out on a monthly basis. We reviewed whether she would have enough money to live on, or if she would need to liquidate some assets to give her the cash to pay the bills.
These are decisions to share with your financial planner or accountant, or someone else who knows your financial circumstances well. Try comparing what you and your husband lived on as a couple to your current needs today. Some costs will be lower and some may even be higher.
Once you have a good understanding of what it will cost you to live, you can work with your investment advisor to determine where the money will come from. Ask these questions: are you still working, are you receiving a pension or insurance money, or do you need to plan for your money to come out of your investments? Either way, it's a smart practice to keep your expenses within the limit of your income to make sure you stay in "safe" territory, and don't start to erode your investment capital too quickly.
Have enough liquidity, plus an emergency fund
Widows need to be sure that they have enough money that is easily accessible for living expenses to see them through this initial time of adjustment. Plan for reserving enough to live on for one year, and keep this money separate from your investment accounts, which may fluctuate. Instead consider putting it in a combination of high-interest, short-term investment vehicles, that can be drawn on any time, as required.
Identify your long-term financial needs
Eventually you will start to imagine how your future may change, and what you would like your life to look like. For example, will you continue living in the same house and in the same city, or will you move closer to family and friends?
Many widows end up second-guessing themselves on every decision for a long time. Preparing a plan for your life's priorities as well as for your finances is the first step, and moving forward one small step at a time will keep you from feeling overwhelmed. As an investment advisor I can help you create a personalized financial plan for you working with dedicated specialists. This type of plan illustrates the long-term impact of your investment growth, compared to what money you will need to withdraw to live on over the course of your life. This illustration is the result of all our questions and thinking about the future.
When the financial plan illustrates on paper that you are going to be able to look after yourself and your family the way that you hope, many widows feel that a large weight is lifted from their shoulders. If the projection shows that your money runs out sooner than we would like, that is also important information. You can start implementing changes today that will affect your long-term results (this may include selling your home at a certain age, going back to work if you are able, or cutting back on certain expenses).
Either way, we can help you to review your financial situation as your lifestyle and goals change, navigating through this difficult time and guiding you through the many complex financial questions that you will encounter along the way. Creating a plan will show you what you need to progress to financial independence at your own pace.
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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