5 MOST COMMON FINANCIAL QUESTIONS FOR SINGLE PEOPLE
If you find yourself alone either by choice, quarantine, divorce, or the loss of a spouse, please remember that although you may feel alone, you are not. Many people in these circumstances turn to friends or to the internet/social media platforms to gather information on how best to proceed with one’s finances. The purpose of this article is to answer five common financial questions we regularly see among our single clients from our decades of experience as Financial Advisors and Certified Financial Planners ™.
Should I purchase a new home?
The purchase of a new home is deeply emotional, particularly in the cases of divorce or death, because it signals a new beginning or chapter of life. We encourage our clients to rent for a year before making this enormous decision for a variety of reasons, but here are a few to consider: How do you know you will like your neighbors/neighborhood? Where will your children/grandchildren be living a year from now? Will one year of time allow you to settle into a budget that you can rely on? Before you take a significant portion of your net worth to buy a home, give it one year of time to settle into your new normal.
What should I do with my investments?
We usually encourage our clients to take on less financial risk with their assets after divorce or death. Both of these life events lead to a lot of emotional trauma and the last thing we want to see our clients experience is financial trauma. Going through the Coronavirus, we can all see how fragile the markets can be on a moment’s notice. The Dow Jones Industrial Average was as high as 29,568 on 2/12/2020, and as low as 18,213 on 3/23/2020, a little over a month later. That is a decline of 38.4%. Taking less risk after a divorce or death will help soften the downside of your investments, and limit the list of things to worry about.
Who will take care of me when I am older?
If you are in good health and depending on your age, a long term care policy may be a good idea. Most parents and grandparents don’t want to be a burden on their families. A long term care policy can be a good solution by shifting the financial and physical burden of dependency on an agency that specializes in this type of care. The cost varies and depends on a lot of factors, but it’s definitely worth exploring.
Will I outlive my assets?
This is one of the most common questions we hear post-divorce and death of a spouse. It really starts with a budget to understand how much money you spend in a given year and to then understand what level of income your assets can support. Once you understand your goals and needs, many financial institutions have the software to simulate thousands of different scenarios to see the impact on your financial assets long term. The more goals and expectations you have, the more assets you usually need to meet these goals. Have a plan and understand what sacrifices or changes need to be made in order to NOT outlive your assets.
How do I generate income from my financial assets in the post coronavirus world?
Many consider this low-interest-rate environment difficult to generate income. As an example, the 10 Year Treasury Bond is paying .597% as of 4/29/2020. In our entire working careers, we can’t remember a time when the yields were so low. To help meet this challenge, if suitable to your situation, consider exploring Covered Call Options Strategies, annuities, and/or dividend-paying stocks to potentially boost the yields in their portfolios.
The knowledge is available to you, you just have to find the time to educate yourself, create a plan, and then monitor it. If you prefer to utilize the services of a Financial Professional, find one that you can trust and depend upon. Make sure they educate and provide all the available options to you, so you can make the best-informed decision for your new life. Do the homework to ensure that the financial advisor(s) work at a reputable company, they have your best interests in mind, and they have a fiduciary obligation to YOU!!!
Meet the Author
Mitchell Lamchick, CFP ®
First Vice President, Wealth Management