Advice for managing a divorce settlement

With the emotional and psychological scars it can leave, divorce can be one of the most difficult life transitions. Unfortunately for many, the financial impact isn’t much better. Often, the same income and assets that supported one family must now support two households and lifestyles, creating a difficult transition period for both parties. Many times, however, it’s particularly difficult for the spouse who is less financially sophisticated.

If you find yourself in this position, you may have received a financial settlement to fund or at least partially fund your post-divorce lifestyle. While that can be a good thing, it does bring about a pressing financial question: What do you do with that settlement money?

There’s a certain feeling of relief that can come from receiving a financial settlement in a lump sum. You may have the cash you need to meet expenses, along with the peace of mind of having money in the bank — at least for the short term. But expenses can add up quickly, and leaving money in the bank for a long period of time may not generate the income you require. As such, your only alternative is to attempt to use that money to generate returns that can help fund your lifestyle. And that is best accomplished by investing … though converting cash into a well-planned investment portfolio that generates returns for the next few decades — while managing risk — is easier said than done.

At times, investing can be uncomfortable for even the most seasoned of investors, let alone for novices who cannot meaningfully replace lost capital. History has shown, however, that successful investing is best accomplished by constructing a portfolio to deliver total return at an acceptable level of risk. An experienced investment advisor can help construct that portfolio and ease some of the uncertainty that comes with investing.

If you’re new to investing, you can leverage the wealth of online resources available to build your knowledge. Take the time to learn about the various asset classes and how they impact risk, as well as investment fees, taxes, and the impact of inflation on future purchasing power.

One of the most important investment choices you can make is selecting your investment advisor. Again, there are plenty of online resources that offer checklists to help you choose. I suggest asking your friends and colleagues or even your professional advisors, such as your accountant or divorce attorney, for recommendations. Once you have a list, you should interview two or three advisors who meet all of the qualifications outlined in your research and allow time to reflect on your choices before making your final selection.

Though there are other investment options available, such as do-it-yourself or “robo-investing” programs, having an investment manager offers a very important advantage: guidance through uncertain market conditions. That can help make the transition to successful investing — and managing your life post-divorce — a lot less difficult.

Working alongside a financial professional can help you navigate the future and reach your potential. To learn how our Wealth Advisors can help you, please call 1.877.670.5400, visit us online, or visit your nearest Citizens branch.