Gaining financial independence later in life

We all reach financial independence in our own time. Some of us have the privilege to learn at a steady pace and branch away from financial support systems when we’re ready. Others are thrust into new territory and must immediately get their bearings – or risk financial downfall.

In terms of financial independence, there’s no concrete definition. Being financially independent could mean anything – from investing in your first stock to paying your own bills for the first time.

For women who are learning to rely on their own financial prowess later in life, financial independence can look strikingly different from the goals of younger women. The death of a spouse, divorce and other extenuating circumstances can catapult older women headfirst into financial responsibility, but it’s never too late to thrive.

See related: Overcoming hardships by embracing financial independence

Death of a spouse

The death of a loved one is never easy. Even though it may seem like there isn’t even time to breathe during your first year as a widow, you’ll need to tackle financial issues quickly before they spiral out of control.

This is especially important for women because men are often still seen as financial providers. According to a 2018 report by UBS, many married couples are simply imitating the roles they witnessed growing up: Mothers handled the day-to-day finances while fathers handled the investing.

That same report states 59% of widows and divorcees wish they had been more involved in long-term financial decisions and 64% of widows blame themselves for not being more financially involved. This is a problem – especially when a spouse dies unexpectedly. For example, Kerry Hannon, personal finance and career strategist and author of “Money Confidence, Really Smart Financial Moves for Newly Single Women,” was shocked to learn how unprepared her sister-in-law was.

“My brother died two years ago unexpectedly,” says Hannon. And his wife did not have a checking account in her name, she didn’t have a credit card in her name – in fact, she had never even used an ATM.

While not all cases may be that extreme, the underlying division is still present. The good news is there are a number of ways you can prepare yourself before and after the death of a spouse.

See related: Financial guide for widows: building credit

Next steps

• Rely on trusted advisors. Your attorney, CPA and financial planner can help you manage your affairs and create a temporary plan of action. If you don’t have a financial planner, you can always search for fee-only advisors in your area.
• Get your spouse’s papers in order. It might be difficult, but you need to figure out your spouse’s debts and assets. Make sure you alert creditors of your partner’s death. Failing to do so could result in canceled credit cards or even attempted identity theft.
• Find out about credit card debt. This goes hand in hand with getting paperwork in order. If your name was on a credit card account as an authorized user, you cannot continue to use it. Doing so could constitute unintentional fraud. Also, if you reside in a community property state, you may need to address debt with your attorneys as the surviving spouse is responsible for all debts in these states – even if you had separate accounts.
• Be wary of fraudsters. Scammers may try to coerce money out of you. Don’t do anything without official documentation. Ask for their contact information and an official bill to be sent to you. “If something, or someone, doesn’t feel right, walk away,” says Russ Thornton, a fee-only financial advisor and founder of Wealthcare for Women.
• Put financial decisions on hold for six to 12 months, says Thornton. This ensures “any significant, lasting financial decisions are made as rationally and clearheaded as possible.”
• Set boundaries. You might be approached by family members asking for money you’ve inherited. Don’t give in. You need it to support yourself in the coming years (or even decades).

“This is your life and now,” says Thornton, “you’re the one solely responsible for making sure you protect your own interests – financial or otherwise.”

See related: Am I liable as an authorized user for my deceased husband’s card debt?

Divorcing your partner

Despite common misconceptions, 50% of marriages do not, in fact, end in divorce. According to the National Center for Family and Marriage Research at Bowling Green State University, 39% of marriages will end in divorce. While 60% of these involve couples between the ages of 25 and 39, the divorce rate for couples 50 years of age or older has doubled since 1990, according to the U.S. Census Bureau.

Statistically, divorce takes a bigger toll when it happens later in life. One study found that divorce at a later age caused worse depression than widowhood. Many women in this situation also struggle to thrive financially after such an abrupt shift. U.S. women over the age of 50 experienced a 45% drop in their standard of living after a divorce, compared to the 21% drop for men of the same age.

Thornton saw firsthand what a divorce later in life could do to someone. “In my parents’ relationship, my dad handled the family financial affairs … After their divorce, my mom…ultimately exhibited what I’ve come to call the ‘caged lion’ effect,” says Thornton. “I believe my mom felt, rightly or wrongly, like she was captive to my dad’s financial decisions and, upon being in control of her own substantial finances, she was like a lion released from her cage.”

Thornton saw his mother spend freely, with no regard for future consequences. “She never had a plan or strategy in place, nor did she think about her long-term financial situation. In many ways, she’s paying the price for that today – and will for the rest of her life.”

A controlling spouse coupled with a shaky understanding of finances creates the perfect storm for one-sided reliance. While it’s fine to depend on one another, losing your independence in the process is never ideal.

“In my 11 years of marriage, I became very dependent on my husband for all things financial,” says Evangelina Ayala, a middle school teacher from Texas. “I was not self-sufficient … I regret depending on anyone for financial support.”

Next steps

If you find yourself in the midst of a divorce and are unsure how to proceed, it’s imperative to think about all present and future financial goals.

• Don’t make any rash moves. Don’t invest overzealously or sell your home on a whim, says Hannon. Get centered and lay your financial life out in front of you so you can clearly decide your next steps. “If you’re already on your own and working to become financially independent, you should first define what financial independence means to you,” says Thornton.
• Consult with a financial advisor. After realizing what it is you need, make a plan with an advisor. Look at fee-only advisors, says Hannon. If you’re in the middle of a divorce, they can help you uncover critical financial assets that you might not be aware of – such as the marital home, engagement and wedding rings, bank and retirement accounts, shared property (like vehicles) and college savings accounts. They can also help you plan for debt repayment, an emergency fund and more.
• Don’t forget to change your will. If you want to prevent your ex-partner from receiving financial privileges granted to them in your will, you will need to update it.
• Don’t increase your debt. While this may be easier said than done, always keep it in mind. Divorce is expensive and though it may seem stressful now, the financial freedom you’ll have down the line will be worth it.
• Make changes going forward. If you plan on settling down again after your divorce, keep an eye on destructive financial patterns. “I honestly think every woman needs to have an account in their own name and have their own financial identity,” says Hannon.

Getting a divorce can be “incredibly empowering,” says Whitney Morrison, a CFP and the Director of Financial Advisory at LegalZoom. “There’s a bit of a rebirth. Like a reclamation process where it’s like reclaiming yourself and your power. … I’ve worked with a lot of women who [say] the most incredible time in their life is after their divorce.”

See related: Collaborating with your partner on the finances

Other extenuating circumstances

Not everyone has the same financial journey, knowledge or background. There are multiple reasons why someone could seek financial independence later in life – some more sensitive than others.

Whatever the case, the advice varies on the situation, and you should collect as much knowledge as possible before making any substantial decisions about your finances.

Bankruptcy

If you’ve just filed for bankruptcy, you probably already have a good understanding of what your finances look like. However, there are still a few things you need to keep in mind. For example, you should carefully compile all the documentation you can and keep a close eye on your credit report.

One big priority after bankruptcy is beginning an emergency fund. This is going to be a big part of your budgeting because once you have that under control, you can start putting away a specific amount every month. That small portion of leftover income can be used for a rogue flat tire or some other unforeseeable emergency. By doing this, you won’t overextend your credit or yourself in the future.

“[Bankruptcy] does not make you a bad person,” says Morrison. “If you can start establishing some positive behavior, putting some positive stuff on your credit, your score will go up. You’re not doomed forever.”

Financial abuse

According to the Center for Financial Security, financial abuse occurs in the majority of instances of domestic violence. Identifying the signs, however, can be tricky as financial abuse looks different for every survivor. Restricting access to accounts, opening accounts in another person’s name and limiting purchasing power are just a few examples.

After leaving a financially abusive situation, it’s time to focus on you and your needs. “You absolutely have to put yourself first,” says Hannon. “It’s hard to do [because] women tend to put themselves last when it comes to money things.”

The best first step you can take is to assess your financial situation. Pull your credit report at AnnualCreditReport.com and go from there – either start damage control or begin building your credit. By taking certain steps, you get closer to achieving financial independence.

See related: Starting over: How to rebuild your finances after experiencing financial abuse

Looking ahead

Whatever your circumstances, you should celebrate the steps you’re taking toward financial independence. Don’t compare yourself to others, either. Your journey is your own.

“And remember, no matter how big your goals, it all starts with one small step,” says Thornton. “Focus on progress, not perfection.”

If you have a story to share about gaining financial independence or have questions about financial problems faced by women, reach out to us at tohercredit@creditcards.com.