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5 Steps to Starting Over at Midlife
After her divorce,
Marian was suddenly a single parent with no career. The hole she was in
started getting deeper. Here are 5 steps that are helping her start
over.
By MP Dunleavey
(as seen on MSN.Com)
(MSN.Com’s
Editor's note: Columnist MP Dunleavey and several other women have come
together online to strip away the myths surrounding money, speak frankly
about their finances and liberate themselves from debt. Follow the quest
for financial fabulousness of these Women in Red every other Monday in
Dunleavey's column on MSN Money.)
One of the most heart-rending aspects of writing this column is the
e-mail I receive from men and women facing personal crises. The cause
can be divorce, illness, job loss, a vanishing pension or ill-advised
investments, but the effect is the same -- these readers have had the
financial rug yanked out from under them.
In these straits, people are faced with the pain of starting from
scratch in midlife, with no roadmap to help them regain the ground
they've lost.
Marian, 51, a divorced mother of three living in Montana, experienced
just such an upheaval when her marriage ended eight years ago. She was
left with no alimony, no child support and, at the time, no career of
her own. Even now she's struggling to start over.
"I'm a walking financial disaster," Marian admitted when she first wrote
to me. "I am unable to be aggressive collecting from my clients (in her
new business), and right now my water and electricity are turned off for
non-payment. Need another Woman in Red?"
Are you kidding? Step right up to the big red tent and read all about
the five key steps Women in Red take to make a fresh start. But first,
let's take a closer look at Marian's situation.
Taking financial risks
After her husband left, she used her college degree in accounting to
land a job at a brokerage house so she could support herself and her
three young sons.
While she was there, she heard about a career helping people navigate
the financial side of divorce. Inspired, she trained to become a
Certified Divorce Financial Analyst (CDFA) and decided to start her own
business, helping other women like herself.
A great idea. But three years ago, Marian's finances were precarious.
So, like a lot of people who are fighting to re-establish themselves,
she dug herself in deeper.
She liquidated the small IRA she'd saved through her job at the
brokerage house (about $17,000 after taxes and penalties) to start up
her new venture.
Then last year, she took out a $100,000 mortgage on her home, which had
been paid in full, and used that money to pay off personal loans, a car
loan, medical debt and to prepay a year's tuition and expenses ($45,000)
at a school for children with special needs for her eldest son, now 14.
Personal stress adds to financial woes
While other members of the Women in Red usually have two or three
financial hurdles to struggle over, starting-over folks like Marian have
to tackle many at once.
It's not only hard, it's damned hard to juggle both the financial
demands and the emotional stresses of life with few assets, little or no
security and no stable source of income -- especially later in life.
When I interviewed Marian for this article, she told me she was down to
her last $3,500 -- barely enough to get her through the summer -- and
she had nothing coming in.
Starting over may be one of the most challenging financial dilemmas, but
it's not impossible. Like most money problems, this one is best handled
in small bites.
1. Pack up your emotional baggage
Depression, hopelessness, anxiety, resentment -- all these feelings are
normal and natural when unwanted events force you to restart your life.
Unfortunately, they're also likely to get in your way. "I'll get some
momentum going in my business and then get mired in all these personal
issues," Marian says.
Do whatever you can to separate your feelings from the action you need
to take, especially if you're slipping into the "why me?" trap. I know
this isn't easy, but a financial crisis is like a fire; the better you
manage unruly feelings, the more effective your efforts will be to
improve the situation.
Marian recommends reading James Clavell's translation of Sun Tzu's "The
Art of War," an ancient Chinese military text, as a way to learn how to
think more strategically in your battle for financial sanity.
2. Be your own financial counselor.
The main advantage of stowing your emotional baggage in the overhead
compartment is that you can become more objective about your situation,
which makes it easier to act on your priorities.
As a financial counselor who specializes in divorce, Marian is in a
unique position to help herself. I asked her to pretend that I was her
"client" -- a 51-year-old single mom with three kids and a deadbeat
ex-husband. What advice would she give me?
(You may not be a financial pro, but you can do this role-playing game
with a friend. Step outside your own life and assess your problems as
though they belonged to someone else. What would your objective self
tell you to do?)
Marian the adviser had excellent guidance for her desperate "client,"
and urged her to rethink her financial priorities. Rather than focus on
collecting child support from her ex -- "it's taking too much emotional
energy, and it's not a short-term solution anyway" -- Marian advised her
alter ego to drum up more income, even if that meant making her business
a lower priority.
3. Face the numbers
The sine qua non for finding financial sanity -- no matter what
circumstances you're in -- is to face your financial facts. Though most
people hate it, the numbers will set you free. "I knew all this stuff
about my situation," Marian says, "but talking about it, putting it all
into words, has made me see things much more clearly."
Here are Marian's income and expenses (because she's got an erratic
income, these are yearly figures):
|
Marian's annual income and expenses |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
4. Look for ways to cut expenses
Running a family of four on one income when you're also restarting your
life doesn't leave a lot of room for extras, and Marian doesn't really
have many. So the main way Marian can cut back is by finding a way to
afford her son's tuition.
Switching schools isn't her first choice (although it would ease her
economic stress). But given her son's progress in just the last year,
Marian believes that one more year of specialized schooling may give him
the skills he needs to thrive at a public school back home.
To offset this massive cost, Marian is researching individual education
grants, state funding, low-cost loans and the possibility of deducting
some of his tuition as a medical expense.
5. Earn extra money
When people take a financial hit that causes them to start over, they
most often feel an immediate drop in their cash flow. There's no remedy
for this but to find creative ways to earn more.
As you saw in Step 2, with Marian playing the "adviser" to my "client,"
that was her strongest piece of advice to herself. And in brainstorming
together, Marian and I came up with a couple of possible income streams.
-
Get temp work. Marian already supplements her income this way, but thinks she could expand her hours.
-
Dust off an old skill. It turns out that Marian can make good money filing certain financial papers for divorce lawyers. She's busy making legal contacts now.
-
Promote her business. While the first two steps will boost her income in the short-term, Marian is also setting up financial seminars for divorced women for the fall that will attract more clients.
Starting a support network
These steps are just a beginning for Marian, but getting started --
especially when you're starting over -- is often the hardest part.
So Marian came up with another way to make financial progress, something
everyone in the Women In Red could use. She suggested that rather than
each woman working individually on her problems, that we establish a
buddy system or support network.
"That way if I'm having a hard time, I know there's someone I can call,"
she says.
When you're struggling to change your financial life, you need all the
support you can get.
DebtFreeGuru.com - Tip of the Week - Monday, August 1, 2005
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