When the Going Gets Tough...

...Many turn to financial counselors

A life-changing event is often the stimulus that drives people to seek financial advice. While most will do better if they start their planning before a catastrophe or major change occurs, "I would say 60% to 70% of the people I see for the first time are driven to my doorstep by one event or another," says David Berman, a certified financial planner (CFP) in Baltimore.

What are the major life events that motivate people to solicit help?

DIVORCE. Dividing a household can create economic havoc. Making matters worse, "everybody's terrified," says Mary Vanderhaar, a CFP who specializes in divorce.

A good financial planner can help you figure out your net worth, expenses, and long-term financial needs--all critical components of an equitable settlement. Too often, divorce settlements focus on the spouses' income, instead of their living expenses, says Barbara Raasch, a personal financial specialist at Ernst & Young.

Many divorcing couples underestimate how much more money it costs to support two separate households. Unless you're extremely well off, you may have to make changes in your lifestyle. Raasch suggests consulting a planner even before filing for divorce. "As awful as this might sound, if you see a potential for divorce, you want to prepare yourself as much as you can for it," she says.

DEATH OF A SPOUSE. Psychologists rank a spouse's death as life's most stressful experience. In the midst of all your grief, you may also find yourself dealing with a large amount of money--from life insurance, retirement plans, and investments, says Mitchell Freedman, a personal financial specialist in Sherman Oaks, Calif.

A good adviser can help you use that money to provide financial security. While many of his clients want to leave an inheritance for their children, Freedman encourages them to focus on their own needs first.

FINANCIAL WINDFALL. If you win the lottery, inherit a large sum, or bag a legal settlement, you'll face tax and estate-planning issues. Judith Lau, a Wilmington (Del.) CFP, recommends that clients stash their windfalls in a low-risk money-market fund until they've mapped out a plan. "One of the most common mistakes is to do things too quickly," Lau says.

A financial planner can also help you deal with bad advice. Windfall recipients are inundated with stock tips, insurance offers, and proposed business ventures. Lau advises clients to tell friends and family to send their investment ideas to her. It's more diplomatic than telling them they're a poor credit risk, she says.

CAREER CHANGE. In the past few months, Bob Bilkie, a Chartered Financial Analyst in Southfield, Mich., has talked to quite a number of people who want to get off the corporate treadmill, a trend that he attributes to last year's September 11 terrorist attacks. The recession has also forced many workers to make adjustments. Some are offered buyouts. Others are laid off or take early retirement.

Bilkie says most people have only a vague idea of how much they spend. That information is critical to determining whether they can afford to reduce their hours, switch to a lower-paying job, or stop working altogether.

The news isn't always bad. Bilkie advised an occupational therapist who loathed his boss. After completing a long-term analysis of the client's savings and estimated investment returns, Bilkie told him he could afford to retire. Six months later, the client was still working. The reason? Once he knew he could afford to quit, working for his unpleasant boss didn't bother him as much.

By Sandra Block, USA Today

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