Looking to the Future as a Widow

Jane Young, CFP, EA

Jane Young, CFP, EA

During the first few years of widowhood you need to take care of yourself and give yourself time to grieve.  During this time it’s best to focus on issues that need immediate attention and avoid making long term financial decisions.   Everyone’s timeframe is different, but after a few years you may be ready to start looking toward the future.   Initially, this may be difficult and very emotional.  It’s not unusual to take two steps forward and one step back.  Take it slow and gradually start creating a plan for your future.

Before the loss of your husband, you set goals and dreams together.  It’s very hard to let go of those dreams and start planning for a future on your own.  Many widows feel they are betraying their husband by changing their plans.  This is simply not true, now that your husband is gone your situation is different, and you need to chart a course that meets your new situation.

Start by identifying your values and what is truly import.  Make a list of what you want and need in your life.   It may help to evaluate different areas of your life and identify your needs and desires in different categories such as: family, health, social, faith, financial, community and continuing education.   Using this information, set some broad goals to be achieved over the next five years as well as some long term goals. Some big decisions may come out of this process including where and how you want to live.  Do you want to live in a new city, new house or maybe downsize to something easier to maintain?  If you are still working, do you want to make some career changes?  Do you want or need to go back to school? How do you want to spend your time and money over the next five years?

Once you have identified your goals, develop a financial plan that will enable you to put your plans into action.  Your financial plan needs to provide a balance between your long term needs and your short term goals.  Evaluate your current situation.  Identify your current net worth, your current income and your current expenses.  Are your expenses in alignment with your goals or do you need to make some adjustments?  This is your opportunity to adjust your lifestyle and spending habits to support your goals.

In developing your financial plan, set aside funds for major expenses such as college tuition, a new vehicle or home maintenance.  You should also consider paying off card debt and maintaining an emergency fund of at least four months of expenses.   Do some planning to be sure you’re saving enough for retirement.   If you are in retirement, ensure you have enough funds to cover your projected expenses throughout retirement.  Finally, budget some money just for fun -to do some traveling or pursue some hobbies.

Minimum Liability on Car Insurance Not Adequate for Most Drivers

 

Jane Young, CFP, EA

Jane Young, CFP, EA

The state of Colorado requires you to carry liability insurance in case you injure someone or damage someone’s property.  Colorado law requires liability insurance of at least $25,000 for bodily injury per person, $50,000 bodily injury per accident and $15,000 for property damage.   The law also requires insurers to offer uninsured/underinsured motorist coverage and medical coverage unless you waive them.   Generally, they also offer optional comprehensive, collision, towing and rental car coverage. 

However, the liability requirements set forth by the state of Colorado are not adequate for most car owners.  The amount of liability coverage you need is dependent on your net worth or what you have to lose, if you are at fault for an accident.  If you cause a serious car accident, where several people are injured, the medical expenses could easily cost hundreds of thousands of dollars.  With minimum liability coverage, your insurance is only obligated to pay $50,000.  In this situation, an attorney representing the injured parties would probably sue you for the rest of the medical expenses.  If you don’t have any assets this would be a futile effort, but if you have a lot of assets, this could wipe you out. 

As a general rule, according to Darrell Wilson a local insurance agent who operates Alliance Insurance Group of Colorado Springs, anyone with a reasonable level of assets should carry liability insurance of $250,000 – $500,000 for bodily injury per person, around $500,000 for bodily injury per accident and $250,000 – $500,000 for property damage.  He suggests looking at your personal situation to assess how much you have at risk.

In addition to liability insurance, be sure to carry adequate uninsured/underinsured motorist coverage.  According to Wilson, between 1 in 3 and 1 in 4 motorists are either uninsured or underinsured.  This coverage provides protection if you are in an accident caused by someone with inadequate insurance.  It’s advisable to set your uninsured/underinsured motorist coverage to levels similar to your liability limits.

If you have a reasonable level of assets you should also consider an Umbrella Liability Policy equal to 1 to 2 times your net worth.  Umbrella Liability insurance is usually above and beyond the coverage provided by your auto and home policy, but verify this with your insurance agent.

It’s advisable to meet with your agent to review your insurance coverage at least once every two years.  Periodically, you should also compare the rates you are paying, but make sure you are looking at comparable policies.  In addition to price, evaluate an insurance company’s financial stability and their record of customer satisfaction with previous claims.  On the internet, you can find information on financial stability through A.M. Best or Standard and Poor’s, and information on customer satisfaction through JD Power or Consumer Reports.   Also ask your friends and family for referrals, just about everyone has some experience with car insurance.