Financial Plan for Single Parent is distinctive

Financial Plan for single parent is an essential guide in life’s journey. Divorce is calamitous on the person’s personal finances, especially living with dependent children. Emotional struggle during the divorce is undoubtedly miserable. The situation demands the single parent to regain control of his/her life. This involves becoming more responsible in taking personal and financial decisions logically and not emotionally. People take wrong decisions while they decide emotionally, i.e. out of fear, anger, excitement and greed. Emotions help to react and not to respond. Emotions are part of human nature.

While financial arrangements can be complex, you need a Financial Advisor’s professional guidance to get a grip. If single parent has a detailed Financial Plan in place, proper implementation of action plans will enable him/her to enjoy a worry-free life. Action plans are designed by your Financial Advisor after analyzing your personal aspects along with other technicalities. A genuine Financial Advisor needs to make sure that you’re comfortable in taking required steps as laid down in the Financial Plan. Financial planning is process oriented. As Certified Financial Planner in Kolkata, we address your personal objectives, financial goals, your current cash flow, your current net worth and budgets etc. Thereafter, we sit with the client to design the action plans, procedures, curriculum in order to implement the Financial Plan effectively.

The legal fees for divorce aren’t cheap. The situation is daunting because it turns into a single-income household which needs to cater to increasing cost of living, providing education to children, making provision for own retirement, fulfilling other financial goals etc.

Divorce is a transitional phase. The unfortunate divorcee can’t control the life events but he/she must know how to respond during the anguish. Recently, as a SEBI Registered Investment Advisor in Kolkata, we wrote a detailed Financial Plan for a single mother, who is a medical practitioner.

Uttam Kumar Sen pursued The Certified Financial Transitionist ® course from Financial Transitionist ® Institute, a division of Sudden Money ® Institute, United States. We handled this issue differently. We applied both Technical & Personal Side of money during planning. We’re sharing about how the divorcee, being a single parent, experiences the circumstances.

According to Financial Transitionist ® Institute, the Personal Finance Professional has to deal with clients during transition. It can be disappointing, if the Personal Finance Professional is not at all well equipped to provide skillful guidance to their clients during transitional phase. Divorce is one of the transitions of life events one may experience. Transitions start with an end and may continue for indefinite period. Transition has four following stages:

There are two sides of money and the financial consultant has to address both the sides of money as both are equally important and complex too, i.e. Technical & Personal.

How to assess transitions?

When we talk about to life transitions, it refers change in life. Change is inevitable in life. Sometimes change can come abruptly and dreadfully. We consider “transition” as a gift if we positively handle the change. Almost everyone have experienced any of the below stated transitional situations. Transition refers the following major life events, where major changes in life are challenging and inescapable:

• Change of job;
• Quitting job to start own profession;
• Retirement;
• Pre-pone of retirement;
• Job loss;
• Relocation;
• Divorce, thereby becoming a single parent;
• Loss of parent;
• Loss of spouse, thereby becoming a single parent;
• Permanent and total disablement due to accident or illness;
• Sale of business;
• Liquidation of assets;
• Inheritance;
• Lottery;
• Settlement of life insurance death claim etc.

There are certain life transitions that may leave you feeling crushed, anxious, depressed, or unsettled. Transition experience varies from person to person. According to The Financial Transitionist ® Institute, USA, there are four stages of transition, i.e. Anticipation, Ending, Passage and New Normal. We can see opportunity in a change, but we aren’t taught how to handle changes.

Financial Plan for single parent is always unique in nature

Financial Plan for Single Parent is unique in nature

Dr. Paromita Sarkar (name changed) aged 52, married in 1993 and unfortunately got divorced last year (2019). Dr. Sarkar is a doctor in Govt. Hospital. She has a daughter, Trisha 22 (name changed) student of B. Tech. Trisha stays with her mother. To streamline her finances, she was looking for an unbiased Financial Advisor in Kolkata.

As a single parent, she approached us for financial planning services in Kolkata. During our discussion, we realized that she would also need to go through the unique tools of Transition Planning along with Traditional Financial Plan for single parent.

Due to her divorce, Dr. Paromita Sarkar becomes hopeless, feels unexciting and tired to chase her goals. To her, life becomes purposeless at times with nothing to look forward to. The divorce may make her feel that she is defeated. Various decisions were mutually taken by husband and wife. Now, responsibilities are on her shoulders only. It is the duty of the Financial Planner to consider her situation and design financial planning processes accordingly.

Divorce means alteration of the client’s identity (identity crisis). The person becomes divorced or ex of someone or single.

On the basis of the documents provided, information disclosed, concerns shared verbally during our meetings and her Risk Profile report, we would like to highlight on the following aspects:

1. For daughter: Her daughter is determined not to spend a whopping amount on her Post Graduation as well as for marriage. She will stay in India only. We came to a conclusion that she would need 50 thousand for her Post Graduation at 22 and 8 lakhs for Marriage at 28 in today’s value.

2. Dr. Sarkar’s Retirement Provision: She intends to retire at age of 60. However, if health permits, she may accept extension. Post retirement, she wishes to engage herself in a clinic. This private practice will be more of a voluntary initiative, rather than doing it for earning money. She will be going on vacations to avoid monotony. Every aspect gained ground during our extensive discussions only. Each aspect is subjective. You may have your own choices. That is the beauty of a Financial Plan. As Financial Planners, we enable you to think and give shape to your thoughts. We are making due provisions for the same. We’ll also need to consider a scenario if she can prepone retirement (due to health issues). She would have to accumulate an investment corpus to fund her retirement expenses from age 60 to 85. She requires additional investments for retirement although we have utilized her employment benefits i.e. GPF, Gratuity & Pension towards this goal. We have also utilized her PPF & Mutual Fund investments. Since she is a single parent, her investment strategy would be unique. Apart from considering general aspects, her personal factors must be critically analysed for providing investment advice.

3. Contingency Fund: Being a single parent, she would like to have sufficient contingency funds in case of emergencies like job loss, medical issues or monetary help to relatives. At least  8 months expenses are to be maintained as Contingency Fund to give her adequate sense of security.

4. Life Insurance: In case of Dr. Paromita Sarkar’s pre-mature death, she would like to protect her daughter’s lifestyle & responsibility till her dependency & fulfill current liabilities and commitments.

5. Health Insurance: The Govt. of West Bengal has its own health scheme called ‘West Bengal Cashless Medical Treatment Scheme’. If the employee has registered for the scheme, beneficiaries also get equal coverage as the employee would. The employee can also get reimbursement under this scheme. But still she has personally taken Mediclaim coverage by her own additionally.

6. Fire Insurance: She would like to insure her flat against fire & earthquake.

7. Car Purchase: She would like to replace her car in the next 8 years costing around 8 lakhs in today’s value.

8. International vacation: She would like to go on an international vacation with her daughter in the next 3 years costing around 2.25 lakhs in today’s value.

9. Health: She’s taking necessary precautions and due advice.

10. Risk Profile: Considering the fact that she has taken a small degree of risk in the past with regard to her financial decisions (investments in her case) and she feels risk refers to “uncertainty”, we’ll develop suitable investment strategies to make her achieve her goals on time. As Retirement Planner in Kolkata, we have also noted that although she is prepared to enhance the degree of risk she has been taking while investing, we will need to take calculated risks from here on (avoid unnecessary risks).

During Financial Transitions Planning, through genuine attention, active listening, proper interpretation and connected actions, we are intending to create a safe place for her as a single parent and help her to go for normal working life. Before going through technical (traditional) financial planning processes, we are working with her to address the personal side of money. Unless the personal side of money is not properly addressed, client can hardly follow the technical Financial Plan.