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How to Avoid Financial Turmoil After Your Spouse Dies
Prepare a Budget
As a widow or a widower, you really need to re-evaluate your income needs and projected expenses, both of which will change. Income needs should be projected for your assumed life expectancy and should include an inflation assumption. This means that we plan to provide you with an income that increases annually to keep pace with inflation. After all, each year it costs more to purchase food and clothing.
Without proper planning, your assets could expire before you do. Prepare a budget. This is a daunting task for many, but budgets are extremely helpful for you to manage your money wisely.
If Ann's income is sufficient to meet her current expenses, then she will be able to invest the insurance proceeds she received more aggressively than otherwise, due to the longer expected holding period. This analysis would also determine whether or not it was appropriate for Ann to invest in her home.
Create an Emergency Fund
Ann should also establish an emergency fund. This is simply an account from which she can draw in the event of an unforeseen expense that she cannot afford to pay out of current income and includes such things as car repairs, home repairs and extraordinary medical expenses. Money market accounts are very suitable as a funding vehicle for this short-term money. The investor receives current interest rates on their money, yet the money can be withdrawn at any time.
 Plan for the Long Term
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