Beginning anew with her own financial identity
Sometimes life can seem like a great big game of ''Sorry."
Just when you're rounding the corner to get your last piece safely home, you get bumped back to the beginning and have to start over.
That's how Ellen Morris felt. In December, she and her husband divorced after 20 years of marriage. And by February, she discovered that building a separate financial identity was tougher than she ever imagined.
The problem: Even though the divorce was final, the couple hadn't completely severed their financial ties. As part of the divorce, she and her ex had declared personal bankruptcy to get out from under credit-card debt.
Morris, a 43-year-old supervisor with a Boston mutual fund transfer agent, was still living in the Weymouth family home with her daughters, but was dependent on her former husband to pay monthly mortgage and child support.
When the mortgage company sought to collect late payments, she felt helpless. There was a sense of desperation in her application for a Boston Globe Money Makeover. ''I am concerned about ever being qualified to own a home and a car on my own," she wrote. ''I feel very trapped right now without a financial identity."
Fee-only financial planner Walter Herlihy of Beacon Financial Planning in South Easton walked Morris through the numbers. They weren't pretty. With a salary of about $34,000 a year, Morris had only $200 in her checking account and $22,500 in a retirement plan. She owned half the house, which carried a $258,000 mortgage. She owed $57,500 on a college loan for her oldest daughter and had no idea how she would pay the college bill for her middle daughter, who will be a freshman in 2006.
''Other than the house and the money in your retirement plan, there's not much," Herlihy said. But the fee-only financial planner kept the focus on the future, laying out some basic steps designed to put Morris back in control of her finances.
The first step was severing the financial connections to her ex-husband that were continuing to create credit problems. ''The problem with divorce is that until you break off those attachments, you never get out," he explained.
Morris had already created a separate tax identity, filing her 2004 taxes as a single head of household. She got a $3,000 tax refund. ''Since you're getting $3,000 back, take two deductions," Herlihy said, advising her to put that extra paycheck money into her 401(k) retirement plan so that she qualifies for the full company plan match.
Even with minimal assets, Herlihy said Morris couldn't afford to be without a will and other basic estate planning documents, particularly now that she was divorced. So he handed her the card of attorney David Kane, located in an adjacent office, who had volunteered to provide Morris with a will, durable powers of attorney, and a healthcare proxy free of charge.
To get some breathing room on debt, Herlihy suggested refinancing the $57,500 loan that Morris had taken to pay for her oldest child's college education. When it's time for the 16-year-old daughter to look at college, he said, the ability to get financial aid will have to be a key factor in school selection.
Housing was the scariest issue for Morris, who feared that if she sold the house, she'd end up homeless. ''I'm afraid to sell," she told Herlihy. ''I'll be out on the street." But Herlihy assured Morris that her credit history wouldn't keep her from finding a rental and that she would eventually be able to use any house-sale proceeds to buy her own condo if she wished.
Herlihy's assurance was enough to get Morris to take action. Within weeks of meeting with the financial planner, Morris signed a lease for a nearby apartment and was getting ready to move.
Credit, she says, wasn't an issue once the landlord understood her situation. When the house goes on the market this spring, she's hoping the sale will bring in enough for a future down payment on her own condo.
''I'm told my credit rating should be good enough so that I can buy after a year or so," she says. ''Things are happening."
To be considered for a Money Makeover, fill out the form at www.boston.com/business/personalfinance, or call 617-929-2916 and ask for an application.
