Personal Finance

Andrew Menachem: Reassembling the financial ‘puzzle’ after a life-changing event

Marriage, divorce, the birth of a child or the death of a spouse are major life-changing events. They unleash a flood of emotions.

But as the emotional turmoil subsides, it’s important to start thinking about the future, beginning with a clear understanding of your new financial set of circumstances. This is the time to reach out to a trusted adviser who can help you sort through the money-related issues and help you chart a new course for your life.

A good starting point is to take on the various financial issues one at a time, beginning with your assets. What is the status of your investment portfolio, which might contain stocks, bonds, cash or other types of assets?

If you have recently married, your spouse may have assets as well. So spend some time getting to know each other’s finances, including your long-term goals and tolerance for “risky” investments. Your adviser can help you develop a plan that puts you on a solid financial path with peace of mind.

The birth of a child can also change your financial priorities in a heartbeat. You may want to purchase life insurance, start saving for a college education or plan to purchase a house in the next few years.

Divorce is another change in life that can drastically alter your personal financial situation. You might need to reduce your monthly spending to reflect a lower income, be faced with child support payments or need to sell your residence so the proceeds can be split with your “ex.”

If your spouse (or partner) has died, you might be the beneficiary of a life insurance policy or inherit new assets. You should talk with your adviser about the best way to incorporate a large insurance settlement into your existing portfolio. Remember that your personal goals and lifestyle may change again in the next few years, so try to retain some financial flexibility.

Along with a change in your assets, you might be faced with additional liabilities after a marriage, divorce or death. That could include credit card debt, a mortgage loan on an investment property, or alimony payments. You should take a close look to see how those liabilities affect your overall financial position for better or worse.

A major change in your life is also likely to affect your income. You might benefit from a second income in marriage or be faced with the loss of a spouse's salary due to divorce or death.

So look carefully at the new level of income and compare it with your current monthly expenses. If you have enough money coming in to pay all those bills, you probably won’t have to make an immediate change in your lifestyle. Otherwise, you may need to reduce your ongoing expenses to balance your new household budget.

Insurance is another issue to consider after a life-changing event. You should review your medical, dental, life, disability and any homeowners' policies to be sure you have adequate coverage for the adults, children and possessions in your new household. Be sure to see what types of coverage are available from your employer, and compare policy terms and premiums before making any changes.

Finally, you should also review your estate plans and draw up new documents, including a will that reflects your current beneficiaries. You should arrange for the guardianship of a new child and any other young children.

Whatever the situation, a financial adviser can you help reassemble the pieces of your financial puzzle after a life-changing event.

Andrew Menachem, CIMA, is a Wealth Adviser at the Menachem Wealth Management Group at Morgan Stanley in Aventura. Views expressed are those of the author, not necessarily Morgan Stanley, and are not a solicitation to buy or sell any security. The strategies and/or investments referenced may not be suitable for all investors. Follow Menachem on Twitter @AMenachemMS