Q. My husband and I divorced a few months ago, and I got custody of our children, ages 12 and 17. I’m lucky enough to be debt-free, and I own the house we’re living in, which is worth about $350,000. I also have $160,000 in savings, and we receive $1,200 in child support every month. People are all telling me I should be investing, but each one tells me to do a different kind of investing. What do you suggest?
A. I know going through a divorce has got to be hard on you and your kids. Make sure you spend lots of time hugging on them and letting them know they’re loved. Fortunately, things are still pretty good in your world in a financial sense. Your net worth is a half-million dollars, plus you have no debt. Most ladies don’t find themselves as lucky money-wise after a divorce.
But the trauma from the divorce is still pretty fresh, and I wouldn’t recommend making any life-changing decisions right now. You should never make important, long-range decisions when your emotions are out of whack.
I wouldn’t do too much with the $160,000 right now. Just park $100,000 of it in a CD for a year until you get over the shock of everything that has happened. You won’t make a lot of money, but you won’t lose anything, either. Then, take the remaining $60,000 and invest it in good growth stock mutual funds – ones that are very conservative and have at least a 10-year track record of success.
Also, you’ve got to take a look down the road and decide what you want to do with the rest of your life. You’re going to be an empty-nester is a few years. Do you want to go back to school or maybe start your own business? You’ve got a little learning to do about investing, too. Taking a year or so will allow for education and thinking about what you want out of life. Knowledge has a way of erasing fear. Plus, you’ve got a responsibility to your kids to invest this money wisely.
When everything settles down a bit, just take your time and make sure you don’t invest in anything you don’t understand. And spend lots of time loving on your kids, too. That’ll help with the healing process as much as anything.
Spouse as partner
Q. The grand opening for my new business is coming up soon. So far, I’ve done everything on a cash-only basis and my husband has been a huge help the whole time. Do you think it would be a good idea to officially make him a partner in the business?
A. Way to go! I love the fact that the two of you have worked toward a dream together AND done it without going into debt. Doesn’t it feel great to own a business instead of the business owning you?
I know you love your husband, and he sounds like a great guy to have worked with you and given you all that support. Still, I don’t think I’d make him a partner in this deal. A partnership is a pretty bad form of business ownership, and it can be even worse if the partner is your spouse.
First, making him your partner won’t really accomplish anything worthwhile. Second, if things go wrong and this thing tanks you’ll both be liable. If you’re in the type of business where you have some liability and you’re afraid someone might try to come after your personal stuff, I’d look into the possibility of a Sub S Corporation.
Congratulations and best wishes. Grow slow and keep up the good work!
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