Suddenly single

Adjusting financially to the independent life

If you find you’re suddenly single again after many years of being part of a couple, the financial challenges can seem overwhelming. But there are some lifelines at hand if you feel like you’re teetering on the edge of financial chaos. Here’s my prescription for settling your nerves and getting your life back on track.

The plan

If you’ve engaged the services of a financial planner, you need to have a frank and open discussion about your life goals, your values, your investment goals, and financial objectives. You can then feel confident about developing an action plan that includes these key priorities:

1. Determine your net worth. This is a starting point. Determining what you own and what you owe might paint a dark picture – but it’s not the end of the story. It’s the beginning – a place to grow from.

2. Focus on priorities. You’ll have short-term priorities, like paying the bills (including mortgage and other debt) and everyday expenses. And you’ll have longer-term goals, like retirement planning, healthcare, and estate planning, including insurance.

For successful singles, where and how you live are cornerstones of the life you lead. Do you own or rent? A condominium or a house? Do you have a mortgage? A car loan? And if so, do you have a plan to pay it off quickly? If you become ill or disabled, will you be able to continue living where you are, in the style you’re used to?

You definitely need to create an emergency fund worth three months of monthly expenses. Set up that automatic deposit plan to start putting money into a Tax-Free Savings Account to cover you against the unexpected. Purchase some disability insurance. As a single person, you rely solely on yourself for income, and if you were to be injured or in an accident, you could be faced with expenses you cannot afford if you don’t have a safety net.

Maximize any employee benefits you may be entitled to (major medical, dental, and prescription drugs, for example), and integrate those with carefully selected insurance products to ensure you’re fully protected in the most-cost-effective manner possible. Check with your employer to see if they have disability coverage for you, and if not, get some.

Put your money to work. You and your planner should establish an investment plan that best fits your priorities and goals. Your planner will help you create a detailed statement of investment objectives, and a comprehensive written strategy defining the optimal allocation of your investment assets. Continual management, monitoring, and reporting are critical functions of the planner’s role.

First and foremost, as a single person, you should be saving 10% to 15% of your income each year for retirement. Set up your own Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP). Check with your employer to see if they offer a company pension plan or group RRSP.

Taxes, estate planning, and protection. Taxes can have a big impact on disposition of assets. It’s here you’ll really need expert help. Your financial planner should be able to help you make sure your family tax bill is cut to the bone, and that dependants are protected with the proper wills, an estate plan, and life insurance.

Finding a helping hand. If you’re not cut out for do-it-yourself financial management, there’s still hope! A financial planner can help you with budgeting and cash flow, saving and investing, and risk management, including a professional analysis of your insurance and healthcare needs. Look for a “fee-for-service” Certified Financial Planner (that is, someone with the “CFP” designation) in your area to help you design a long-term plan to ensure financial stability and meet your long-term goals. (Full disclosure: I am a practicing financial planner, and I hold the CFP designation. I’m a member of the Financial Planning Standards Council.)

Robyn Thompson, CFP, CIM, FCSI, is the founder of Castlemark Wealth Management, a boutique financial advisory firm specializing in wealth management for high net worth individuals and families. Contact her directly by phone at 416-828-7159, or by email at rthompson@castlemarkwealth.com for a confidential planning consultation.

Notes and Disclaimer

The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned are illustrative only and carry risk of loss. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. Please contact the author to discuss your particular circumstances.