Where the Hell is My Money?
Many of the transitions that women approaching or beyond age 50 will experience can have a direct impact on their finances. And those women experiencing multiple life transitions can sometimes see their financial stability attacked from several different directions. If you are one of these women, then you may have already learned what this can do to your economic independence.
I certainly have! You may have read in one of my previous columns that I am currently without a regular income and I'm working through my own multiple transitions. As shifts began to occur too fast in my life, I quickly found myself panicking and wondering, "Where the hell is my money?"
"Individuals' fears tend to be greater than reality," says Michael Haubrich, president of the Financial Service Group. "When you look at all of your available lines of credit, the equity in your home and your cash available, you may find you have more time than you think to be strategic…"
To survive any financial onslaught you need a plan. Something that will help you get control of every penny because you're going to need them. Often processes like this begin with examining debt. Financial advisors sometimes think that it's more important to know your debt going in, but I prefer to begin with my excess. Why? I've found that I am more diligent when I know what I have before I begin making decisions about what I need to cut back on.
Where is your money?
Start with your cash. Look at your checking, savings, change jars, car console, pants pockets, etcetera. Tally up what you find there and move on to your investments. These are going to be things like stocks, bonds, annuities, 401k and other bulk ventures. Note the current value of each.
Before going any further, I recommend that you educate yourself on the tax implications of sale, withdrawal or distribution of any of these investment funds.1 This knowledge is critical. You aren't just looking for solvency today. You need to be sure you will have it in the future, too. The tax hits from liquidating can be crippling and not worth what's left after pulling out of the investment. In some cases, though, you may find that it's affordable to pay the taxes and add the liquidation to your accessible funds. Do your homework here and decide if you have investments that you are willing to liquidate. Add those to your cash total.
A smart move at this point is to document large physical assets such as your home, cars, antiques… and look to see if you have anything like rare books or coins, artwork, jewelry, china, crystal that have any value. Choose what you are willing to part with to increase your cash and add them to your list. Do your research on their value and note where you might be able to sell them. Document these values. Keep in mind that you may not get out of them exactly what you've written down -- it could be less or even more.
While sorting out large assets, don't ignore your smaller assets. Go through every storage area, shed, garage, closet, cupboard, drawer, box, shelf, etc. and decide what you can put in a neighborhood sale, on consignment or offer online to further boost your cash. This exercise will also clear out a lot of stuff that you no longer use and may help you downsize considerably. Bonus!
If your financial tight wire is due to unemployment, get online or get yourself to the unemployment office and file for your benefits. Apply that amount to your available funds. If you feel any resistance to doing this for any reason, consider what Roberta Matuson, president of Human Resource Solutions has said. "You've worked for it and you've earned it. Apply right away, because it will take time to get processed."
Now that you know what you have, let's figure out what you owe.
Where is your money going?
Be brave and start with your large debts. Liabilities such as a mortgage and/or rent, medical bills, and auto, personal and student loans. Sort them by interest rate, determine what you can pay off immediately without depleting your coffers and do so before totaling the remaining balances. It's important to also include any tax liabilities here for investments that you've chosen to liquidate.
Next the credit cards. One rule that I have always abided by is to never charge more than I can pay off in a month. If you have gone beyond that amount with your own credit card debt, you may want to adopt a habit like this going forward. If you are in serious trouble with your credit cards, or any of your large debts, I recommend that you consider a debt consolidation to begin getting them under control.
Now, jot down what you owe, noting the interest rate, and move to the next step.
Review your incidental debt -- all those nagging little monthly, quarterly and annual bills.2 Before listing and adding them up, decide what you can live without and immediately dispense with those items. I had to do this, too. I actually spent an entire afternoon making calls and canceling or reducing unnecessary services. It was liberating because I was saving money.
What now? Budget!
Comparing excess against debt mostly looks good on paper if you managed yourself well before your financial crisis. If you're not sure how to make the comparison, I recommend using the free budget worksheet from Kiplinger. Or try Calculator.net's in-depth budget calculator. Using the list I include in the footnotes below, you can get a realistic view of your finances.
At this point, there are a few more things you might want to consider before setting your new budget. First, check with your lenders and see if there are any provisions in your contracts for pausing payments of or reducing your loans during times of hardship. Second, check into other available programs for subsidizing your utilities, groceries and rent. Third, consider a part time job to add to your cash flow.
This is a lot to take in. It's hard work getting finances in order and following-up on all of your options, but it's worth the effort. After going through all of these steps, what you're left with is effectively your budget. You know your excess (cash + income) and your debt.
The trick at this point is deciding how to apply excess to debt. For me, this is a transition still in progress and will continue to be so until I establish a regular income. I have to flex with the changing conditions of the transition. In general, my plan has involved a combination of cash payments and some large asset liquidation, but the end goal is to break even.
I won't try to tell you how to apply your cash to your debt. That's a personal decision and it will be different for every woman. However, working out where your own money is and realizing your budget, whether cash-heavy or debt-heavy, will help you to make informed decisions for finding your way through.
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1To learn about tax implications related to liquidation of investments, check out www.irs.gov for more information.
2Because incidental debt varies for everyone, here's a list of things to consider for this step:
• Utilities (gas, water, electric, sewer, trash/recycling)
• Daycare/kids school fees
• Work uniforms
• Insurance (medical, automotive, homeowners/renters, life)
• Property and personal taxes
• Pet's needs
• Lawn care
• Pest control
• TV cable (including Netflix, Hulu, etc.)
• Publications (newspapers, magazines)
• Recurring online fees (Spotify, Lifelock, etc.)
• Storage unit fees
• Health club memberships
• Impulse shopping
• Anything else you can think of
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Leaping the Chasm™ (LTC) provides candid conversations and social media engagement for women in their 40's, 50's, 60's and beyond who are undergoing the personal, physical, financial, education and employment transitions that often accompany mid-life. LTC shares experiences, transfers knowledge, improves outlook, connects people, and helps identify opportunities for this powerful demographic.