Insider Jeff Fleming

Taking the Helm After a Divorce

A divorce can leave many in unfamiliar financial territory. This week, Jeff Fleming guides two readers.

Dear Jeff:
After the sale of my house and divorce, I have around $25,000 to do something with. I have two kids in college and I am 47 years old. What would you suggest I do with the money? I have a little money in an IRA annuity. I pay into teachers' retirement. Can you help me?

Debbie

Jeff Says:
The first step in any financial decision is to plan. What will this money be used for? How long do you anticipate keeping this money invested? Do you already have an emergency fund established? Can you reasonably determine or anticipate your living expenses with two kids in college?

Why is it that planning to provide certainty usually just raises more questions than answers? Perhaps this is why the majority fail to plan. In any event, start by establishing a money market account for use as your emergency fund. Most planners use a rule of thumb that the amount of this fund should be approximate to three to six months income. Use your own judgment. This is certainly not a hard and fast rule. Money market accounts earn current interest rates, but the funds are readily available, should you need them. If you already have one, then you are ready to consider alternative longer-term investments.

Mutual fund investing is ideal for someone in your situation. Such funds are easy to manage and can provide very good long-term returns. Just be sure to read the prospectus of the particular fund in which you plan to invest before doing so. This document tells you about the objective of the fund and all of its charges. This information is very useful when comparing funds.

If this sounds more involved than you are prepared to handle at this point, then consider working with an investment advisor. An investment advisor can help you determine the types of mutual funds you should consider based on your personal financial goals and risk tolerance. The advisor may charge you a fee or earn a commission for his or her services. Both are acceptable as long as you know in advance.

On the other hand, if you have some investment experience and feel comfortable proceeding on your own, then go for it. Just don't procrastinate, which tends to happen far too often when newbies venture into the investment world. You may miss golden opportunities.

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