Today, as I was preparing to do my weekly facebook Live on the Dynamic Divorcee facebook page, I was asked to talk about finances after divorce. I created this post to provide links for the steps I talked about.
***I am not a financial expert. In fact, quite the opposite! I made all the mistakes, so that, I hope, you won’t have to. However, use your own due diligence when deciding steps to take to get your financial future in order. Please consider the following suggestions as nothing more than part of your own research path to financial literacy.***
These steps are given in a specific order that will be most helpful to someone who is used to her ex-husband handling everything.
1. Create a budget. I know. Not fun . . . until you see how much you can save. And shocking when you find out how much of your hard-earned pay is evaporating for silly purchases that really don’t mean that much to you. (I’m talking to you, foofy $7 Starbucks drinks and goofy manicures.) When you find some areas in which you can save, progress to step 2.
2. Use what you’ve saved in step 1 to start paying off high-interest debts and credit cards: To see how important this is and how much you’ll save by paying off debts first, check out this debt-repayment calculator.
3. Read up on savings and investment instruments and get familiar with the language of money. I used the book Personal Finance for Dummies, which has been recently updated. Highly recommend. This is the book that got me started, but there are lots of choices out there. (I read this one after — embarrassing — nearly ten years of mismanagement of my funds by a financial advisor. I knew I had to take things into my own hands, but I didn’t know how. So, I learned.)
Ordinarily, for step 4, I would recommend opening a robo-advisor index fund account through Betterment, but, since we’re in a long-standing market downturn at this moment, and it would be especially devastating for you to see your investments shrink right now, you’ll actually do better (in dollars and emotionally) by opening an interest-bearing savings account.
4. I’m using the Savings Builder account through CIT Bank, where you’ll get (at this moment) an amazing 2.4% interest rate. (That’s better than you’ll get with any CD these days, and you don’t have to tie up your money for six months or more.) Savings Builder is a regular savings account as you’d have with your local bank, except that it’s online banking only. And, it has a very low bar to entry: just an initial $100 deposit, and you must deposit at least $100 a month. For women new to managing money, this helps you to build good savings habits. Look around: There’s at least one other online bank that offers something similar, but CIT is the best rate for a simple savings account.
5. Even in this market downturn, you may need a place to open a retirement 401K or SEP account, and for this purpose, I still recommend Betterment. This link gets you 90 days fee free, but their management fee is truly minimal in any event — just .25% compared with 1-3% for non-robo (that is, human) financial advisors/money managers. You likely won’t be seeing any gains for a while, but at least you’re buying in when stocks are low. To learn more about index funds, go get the Personal Finance for Dummies book I recommended above.
What NOT to do:
Do not get yourself a financial advisor to manage your money. You’ll pay 1-3% off the top for this “advice” and many (including me) have lost a huge percentage of their divorce settlement through a mixture of things like the Great Recession, botched money management, and those hefty money management fees.
But that’s not all. Financial advisors also receive commissions for recommending specific financial instruments and funds to you. They are salespersons for these funds; they have a vested interest. They do not work for your best interest alone, no matter what they want you to believe.
Do not inivest in specific stocks. You want to limit your liability by choosing index funds which largely manage and adjust themselves. For more on this, give Personal Finance for Dummies a read. This book will give you an overview of all of the investment strategies out there, along with advice on what would make most sense for you. And, I promise, the book is written for those who are completely new to managing money.
As I said at the outset, my coaching expertise is in helping women heal emotionally from divorce, and I’m definitely not a financial expert. The links above are just some of the tools I have used, and will get you started in taking control of your money and your financial future. Explore any of them at your own risk. But, I’m hoping that these links will help minimize the risk for you.