Thursday, November 15, 2007

Getting My Ducks in a Row

I got the December issue of Money today, which means I'm going to bed very late tonight. Some great articles this month.

A great big splash of cold water came in the form of an article (not yet online) called "The Single Life," about the long-term challenges of handling your finances as a Single (capital ess on purpose). I walked away from the article with these two insights: 1) being Single (whether divorced, widowed or never-married) has an very different set of fiscal challenges from being Married and 2) my ducks are very much NOT in a row and I had better get them there soon.

First, the nasty statistics. In the 1950's, Married couples made up 80% of the country's households. Today, they account for barely 50% and they are steadily losing ground. Why? Skyrocketing divorce rates, people marrying later and people not marrying at all. Scary big picture, huh?

Now, here are some important financial things that are commonly overlooked by Singles:

1) emergency plans and disability insurance. If I lose my job, I don't have a spouse to support me while I look for a new one. So while Marrieds need to sock away 3-6 months of their barebone expenses, singles should probably have a cushion of 6-12 months. Along the same lines of what-if-you-can't-work, if your employer doesn't cover you for disability insurance, you need to buy your own. This can be very pricey if you are self-employed, but it is an important safety net.

2) beneficiaries and bequests. If a Married dies, his/her spouse will probably inherit by default, even if the Married dies without a will. If a single dies without a will, it could be a nightmare. Unless you want your entire estate to eventually go to your parents (and possible stepparents?), write a will. If you are divorced with a kid(s), a will is a must. Make sure you fill out the forms for beneficiaries on retirement and bank accounts (often ignored by childless singles). I am embarrassed to confess that I have no will and most of my accounts still list my ex as a beneficiary. It's pathetic. Other important documents commonly overlooked: Living Will and Power of Attorney if you are incapacitated.

I will add my own caveats to this list. I find that many of my frum, female Single friends tend to be very lax about their finances (having no savings, no money for retirement, no long-term career plans, no safety net, lotsa unnecessary credit card debt) because they believe in their heart of hearts that eventually, they will just have to get married, since the alternative is unthinkable, and when (not if) they get married, their husbands will rescue them and take care of everything. Coupla things about that: what if you don't get married? and then if you do get married, don't you want to come into your marriage with assets, without debt, with some sort of financial contribution? No one wants to marry someone who is a financial mess. Would you? And what if your husband-to-be is in no position to rescue you?

Finally, when I got divorced, I realized that I was miles behind on my retirement savings, because during the course of my marriage, I relied on my husband to contribute the lion's share of our retirement fund. After all, he was the guy. When our fund became my fund and his fund, I found myself twisting in the wind. This year, I am scrambling to catch up, but at least I have a plan. If you find yourself suddenly single, don't ignore the bald spots where your now ex spouse was filling in. Deal with them, even if it is depressing and scary.

No comments: