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Getting Your Finances Back in Order After Your Loved One Dies

Jan 15, 2019 4 min read Ilana Polyak

Key Takeaways

  • Understand your new financial reality and fill in any income gaps.
  • Make a budget to help you manage a potential reduction in income.
  • Buy a big enough life insurance policy to protect your family in the event of your own death.

 

In the days after the death of a spouse, when you're making final arrangements, working through your grief, supporting family members and tying up loose ends, dealing with finances might not be top of mind. But, tending to finances early on can help ensure that you and your family are protected.

 

 

Take Trevor, a dad of three boys under the age of six in Allentown, Pennsylvania. Shortly after the birth of his youngest son, Liam, his wife Becca collapsed suddenly and died. Becca had run their lives with equal measures of love and efficiency, turning out nutritious meals, thoughtfully planned birthday parties and orderly bedtimes. (Learn more about Trevor's Story on Prudential's Everyday Bravery podcast)

Now all those responsibilities fall to Trevor. As he worries about how he'll get through the day, he's also concerned about the future and whether he alone can save enough to send all three kids to college.

This checklist can help you work through your finances after losing a husband or wife.


Understand your new financial reality

The death of a spouse is sure to bring about changes in your finances, even if your spouse did not make an income. A spouse who kept the home made a financial contribution that could be worth thousands of dollars each month . Babysitters, for example, average $14 an hour, while housekeepers charge $20 to $40 an hour.

Losing a spouse who worked outside the home can have even bigger financial consequences. How will you manage?

If your loved one had a life insurance policy, contact your insurance agent right away so you can start the process of receiving your death benefit. Determine how much of the life insurance proceeds you need immediately to stabilize your income and how much you will can aside for longer-term financial goals such as retirement or college savings.

You can learn more about how life insurance can protect your family and loved ones here.

 

 

Create a budget for right now

With your income fluctuating, you'll need a budget that reflects that and helps you clearly see how your expenses match up. If there's a shortfall, a budget will help you pinpoint areas to trim.

The 50/30/20 budgeting rule is a simple method that uses just three big categories. It works like this:
 

  • Aim to spend no more than 50% of your monthly income on fixed expenses such as rent, food and insurance.
  • Spend up to 30% of your income on discretionary expenses like dining out, entertainment and vacations.
  • Allocate 20% of your income toward long-term financial goals like retirement and college savings and paying down debt.

     

In the months after Becca's passing, Trevor struggled to balance it all. He worried so much about ensuring his children's financial futures that he would often cut back on discretionary spending today.

“My wife used to call me cheap," he says. “[I worry that if] I squander it, it will be gone before I realize it."

Working with a financial advisor gave Trevor a fresh perspective.

“Right now, it's very important to enjoy your kids and do some fun stuff," the advisor counsels. “Reward yourself responsibly."

If you're ready to start working on your budget, use this tool .


Keep an eye to the future

Whatever challenges they encountered, Trevor and Becca never wavered in their commitment to provide a college education for their children. With Becca's passing, it's now up to Trevor to make that goal a reality.

“My biggest financial concern is making sure that I'm able to save up enough for them so that they're financially able to attend good schools and be able to learn and grow and become the good young men that they will be one day," Trevor says.

If your children are young, take advantage of the benefits of compound interest . You may not be able to save the full amount of college tuition, including room and board, but even small deposits in a college savings plan such as a 529 account, can help.

Involving your kids in the process of saving for college gives them a stake in that goal and teaches financial literacy.

Additionally, spend time thinking about your retirement. A reduced family income may mean less money to allocate to retirement savings — at least for a while. If money is tight, you may need to make difficult choices between your own retirement and your children's college savings.

 

 

What you can do next

After the death of a spouse, you may be feeling more vulnerable about your own mortality — especially if you have children. In addition to taking good care of your physical and mental health, make sure to line up enough life insurance to protect your family in the event of the unthinkable. Start by figuring out how much life insurance you need.

 

Ilana Polyak is a freelance writer who specializes in personal finance and the financial advisory industry. Her work has appeared in The New York Times, Barron's, Kiplinger's Personal Finance, Bloomberg BusinessWeek and CNBC.com.

 

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