Life is unpredictable and full of harsh realities. Unfortunately, one of those realities is that women will often outlive their spouses, which is why there are an estimated 11.48 million widow women in the US. Coping with the sudden loss of a loved one is difficult. Facing the financial instability that may occur as a result of that loss? Even tougher. According to the National Women’s Law Center, 16% of widows 65 and older live below the poverty line in the United States. So, you might ask, how does one combat this?
Today, we are going to explore the importance of financial preparedness for women who find themselves without a partner (whether through divorce or loss), look at a case study, and also offer actionable steps to help you safeguard your financial future. Let’s get started.
What is Financial Preparedness?
Financial preparedness refers to the process of planning and organizing your financial affairs and resources to handle expected and unexpected financial challenges. To be financially prepared, you must be able to set financial goals and take steps that help secure your financial stability in the future.
Some examples of financial preparedness include:
- Setting a budget and tracking income
- Establishing an emergency fund to pay for unexpected costs
- Purchasing insurance coverage
- Managing and reducing your debt responsibly
- Retirement planning
- Tax planning
- Financial education
Case Study on Financial Planning for Women
At the age of 65, Susanna has lost her husband to cancer. Facing the daunting task of living alone after having spent more than 30 years together, Susanna is forced to figure out how to manage her financial affairs. This is especially trying due to the recent loss of her lifetime companion.
Being that her husband had a greater grasp on finance, Susanna doesn’t know where to begin. She is unsure about what steps to take regarding her financial accounts. Plus, she does not know what happens to her husband’s accounts now that he has passed away. She realizes she should call a lawyer, but she doesn’t know who to call or even if calling will do any good.
How will the sudden loss of her spouse impact her monthly income? Without her husband, her Social Security payment is cut in half.
Had Susanna been more financially prepared for this day, this confusion could have been averted. Instead, she is left wondering which step to take next. Sadly, Susanna is not alone in her worry. Studies reported by the Consumer Financial Protection Bureau found that most surviving spouses are women living alone, not currently employed, many unable to access help. Furthermore, it was found that newly widowed individuals experience an income drop of 11-37%.
What Should Have Been Done
What if Susanna had been more prepared for the anticipated loss of her husband? As mentioned earlier, women tend to outlive their partners, meaning that there will come a time when you need to be financially independent. Understanding that this could happen highlights the importance of planning ahead.
Take Susanna’s case, for example. Regardless of her husband’s cancer diagnosis, she should have taken steps to educate herself on personal finance. Meeting with an estate planning expert and financial advisor would have also paved the way for an easier transition into widowhood. She would have had a clear path forward, one where the financial accounts are not in limbo.
The same would be true if Susanna were getting divorced rather than ending up a widow. Having control of one’s finances—and understanding how to utilize them—is crucial.
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