5 steps to starting over at midlife

By MP Dunleavey

Editor's note: Columnist MP Dunleavey and several other women have come together online to strip away the myths surrounding money, speak frankly about their finances and liberate themselves from debt. Follow the quest for financial fabulousness of these Women in Red every other Monday in Dunleavey's column on MSN Money.

One of the most heart-rending aspects of writing this column is the e-mail I receive from men and women facing personal crises. The cause can be divorce, illness, job loss, a vanishing pension or ill-advised investments, but the effect is the same -- these readers have had the financial rug yanked out from under them.

In these straits, people are faced with the pain of starting from scratch in midlife, with no roadmap to help them regain the ground they've lost.

Marian, 51, a divorced mother of three living in Montana, experienced just such an upheaval when her marriage ended eight years ago. She was left with no alimony, no child support and, at the time, no career of her own. Even now she's struggling to start over.

"I'm a walking financial disaster," Marian admitted when she first wrote to me. "I am unable to be aggressive collecting from my clients (in her new business), and right now my water and electricity are turned off for non-payment. Need another Woman in Red?"

Are you kidding? Step right up to the big red tent and read all about the five key steps Women in Red take to make a fresh start. But first, let's take a closer look at Marian's situation.

Taking financial risks

After her husband left, she used her college degree in accounting to land a job at a brokerage house so she could support herself and her three young sons.

While she was there, she heard about a career helping people navigate the financial side of divorce. Inspired, she trained to become a Certified Divorce Financial Analyst (CDFA) and decided to start her own business, helping other women like herself.

A great idea. But three years ago, Marian's finances were precarious. So, like a lot of people who are fighting to re-establish themselves, she dug herself in deeper.

She liquidated the small IRA she'd saved through her job at the brokerage house (about $17,000 after taxes and penalties) to start up her new venture.

Then last year, she took out a $100,000 mortgage on her home, which had been paid in full, and used that money to pay off personal loans, a car loan, medical debt and to prepay a year's tuition and expenses ($45,000) at a school for children with special needs for her eldest son, now 14.

Personal stress adds to financial woes

While other members of the Women in Red usually have two or three financial hurdles to struggle over, starting-over folks like Marian have to tackle many at once.

It's not only hard, it's damned hard to juggle both the financial demands and the emotional stresses of life with few assets, little or no security and no stable source of income -- especially later in life.

When I interviewed Marian for this article, she told me she was down to her last $3,500 -- barely enough to get her through the summer -- and she had nothing coming in.

Starting over may be one of the most challenging financial dilemmas, but it's not impossible. Like most money problems, this one is best handled in small bites.

1. Pack up your emotional baggage

Depression, hopelessness, anxiety, resentment -- all these feelings are normal and natural when unwanted events force you to restart your life. Unfortunately, they're also likely to get in your way. "I'll get some momentum going in my business and then get mired in all these personal issues," Marian says.

Do whatever you can to separate your feelings from the action you need to take, especially if you're slipping into the "why me?" trap. I know this isn't easy, but a financial crisis is like a fire; the better you manage unruly feelings, the more effective your efforts will be to improve the situation.

Marian recommends reading James Clavell's translation of Sun Tzu's "The Art of War," an ancient Chinese military text, as a way to learn how to think more strategically in your battle for financial sanity.

2. Be your own financial counselor.

The main advantage of stowing your emotional baggage in the overhead compartment is that you can become more objective about your situation, which makes it easier to act on your priorities.

As a financial counselor who specializes in divorce, Marian is in a unique position to help herself. I asked her to pretend that I was her "client" -- a 51-year-old single mom with three kids and a deadbeat ex-husband. What advice would she give me?

(You may not be a financial pro, but you can do this role-playing game with a friend. Step outside your own life and assess your problems as though they belonged to someone else. What would your objective self tell you to do?)

Marian the adviser had excellent guidance for her desperate "client," and urged her to rethink her financial priorities. Rather than focus on collecting child support from her ex -- "it's taking too much emotional energy, and it's not a short-term solution anyway" -- Marian advised her alter ego to drum up more income, even if that meant making her business a lower priority.

3. Face the numbers

The sine qua non for finding financial sanity -- no matter what circumstances you're in -- is to face your financial facts. Though most people hate it, the numbers will set you free. "I knew all this stuff about my situation," Marian says, "but talking about it, putting it all into words, has made me see things much more clearly."

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