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Financial Literacy Series--Investment Accounts

April 26, 2023

My client opened her own investment account the other day. 

During the marriage, her ex managed the finances and met with their advisor--she didn't even have access to the accounts before the divorce, so she didn't think about them.  My client's priority during the divorce negotiations had been making sure her children could stay in their current schools--and the settlement enabled her to keep the marital residence.  The equity in the home was the bulk of her divorce settlement, which left her with very few liquid assets when we met.

As we worked together, we developed a clear picture of her cash flow--how much money she had coming in and how much money her expenses cost each month.  To her credit, she was realistic with herself and with her children about the changes needed to be able to afford life post-divorce.  I find this to be one of the hardest decisions my clients face--they often try to keep everything the same in an effort to help their children adjust.  I helped my client think through her priorities and develop a list of goals and a timeline for saving towards these goals.  This timeline helped her feel better about the lifestyle changes she was making for herself and for her children.

I made sure my client had updated legal documents and a trust in place to protect her children if she passed away, that she had enough insurance in place to take care of herself and her children in case she had a car accident, in case she was sued, or if she became disabled, and we implemented a whole life insurance policy that carried a long-term care rider so she knew where she could pull money from if she needed assistance for daily living activities.  Next, we developed a cash flow plan to establish a liquidity fund to cover 12 months' worth of living expenses--that took awhile, and a lot of discipline on her part.  Our cash flow plan included a series of direct deposits to multiple checking and savings accounts, and she told me that having a lower amount in her everyday checking account was helpful in avoiding the impulse purchases that had originally been part of her lifestyle.

´╗┐Once we'd taken care of my client's insurance needs and she'd set aside a liquidity account that would enable her to pay her living expenses for an entire year, she felt confident investing her money and taking on market risk.  Before, she'd been worried about losing money--what if her account was down and she had to replace the water heater?  My client told me she'd had a credit card in college and had gotten into debt, and she didn't want to ever be in that situation again.  I've gotten to know my client well during our meetings and from spending time with her at social events.  She's done a good job of adjusting to her new single lifestyle, and she's working on prioritizing her own needs alongside her children's needs.  She has started a business, and she has let her children know she can't contribute a ton of money to their college expenses.  Now that my client has reached stability post-divorce, we're talking about her financial goals for the long-term.  She wants to travel and she definitely doesn't want to move in with her children when she's older.  

With an uncertain income from her business and support payments ending soon, my client recognizes the need to invest money in order to build wealth for her future plans.  She understands that she'll be most successful if she leaves the money in the market for a long time, and if she takes the risk of losing money from time-to-time.  I've helped her think through different scenarios to determine how much ´╗┐money she can stand to lose, and I've helped her understand the pros and cons of taking market risk.  I'm conservative in making my financial plans--I've been divorced and I know how important financial stability was to my recovery and to my children's adjustment.  If you're trying to get your finances in order, then I can help you develop a strategy for your situation.  Once we make sure you've protected yourself and your children from the most common financial risks, then I can help you invest money.  Specifically, I can help you:

  • Consider market volatility
  • Ensure your strategy reflects how much risk you are willing to take on
  • Take the emotion out of investing

I can research investment options for you and make recommendations for where to invest your money.  To discuss your goals and how investing may be a part of your overall plan, schedule a time to talk with me here.