David Bach The Automatic Millionaire

This summer, a close friend said to me, "David, my mom is going through a divorce. Her house is for sale and she's not sure if she should rent a place or buy a new home in this market. What do you think?"

As we sat on the beach, my friend Jennifer (not her real name) and I discussed her mom's situation, how difficult the divorce had been, and her worries about her mom's financial future.

I listened carefully to Jennifer, and then shared with her some heartfelt advice and wisdom, having worked in the past with hundreds of clients in the same situation. What I told her might also be helpful to you (or a loved one) if you're unsure of what to do with your money after a divorce or the death of a family member.

First, Do Nothing

There are often dozens of financial decisions to be made during a divorce or after a death. You might find yourself asking such questions as: Should I rent or buy? How should I invest the money (assuming there is any)? Should I hire a financial advisor? If so, who? How do I know I can trust them? Should I invest in stocks, bonds, or mutual funds? Should I start a business, or invest in one?

The questions can seem endless, and often lead to knee-jerk emotional decisions. My advice to Jennifer's mom was to do nothing right away that involves significant financial decisions or commitments.

I went on to explain to Jennifer that making serious financial decisions in the first year after a divorce or death can lead to regret, and more important to financial mistakes that can last a lifetime. Instead, I said, her mom should give herself a solid year in order to clear her head.

Take a Year to Get Clear

Having worked before with divorced people, widows, and widowers, I can tell you from experience that both of these life-changing situations take a while to heal emotionally. It takes time to go through the feelings of losing someone you love either to death or divorce.

The best thing you can do the first year is deal with the denial, anger, pain, and confusion of the death or divorce. It can take months and often years to come to terms with what has happened, and only then can you finally reach a period where you can think straight.

Even the toughest people need to take time to grieve. And often, the tougher you are, the harder it can be and the longer it can take.

Find Your Money, and a Great Attorney

When you go through a divorce or the death of a loved one, the single most important thing you can do financially during the first year is to simply "find the money."

Jennifer's mom isn't yet officially divorced, and Jennifer is concerned that she isn't being treated fairly by her dad when it comes to finances. As Jennifer told me, "Mom thinks he's hiding money, and she's not sure what to do."

"Tell your mom she needs to hire a professional," I advised. "She needs to get her attorney to help her find someone who does forensic accounting to search for the money." Forensic accountants spend their careers finding money that people and businesses try to hide.

When you're starting the process of a divorce, you need to know how big the financial pie truly is before you split up -- which is why finding all the money is so critical. If you're dealing with a death, it's equally critical to find all of the assets as soon as possible, as you only have nine months by law to settle the estate.

Make Your Money Safe

Initially, put the money you come into after a divorce or death somewhere safe and simple. You shouldn't tie it up in a long-term investment or anything risky.

My recommendation for Jennifer's mom was to put the money she was to receive from the sale of the family home into a money market account. Money market accounts are paying over 5 percent right now. They're liquid, safe, and often insured. You can withdraw your money without a penalty. It doesn't get any safer and simpler than that -- an excellent solution for the first year while you're getting your head and heart together.

My favorite online savings account today is EmigrantDirect because they offer one of the highest interest rates in the country. As I write this, the rate on their American Dream Account is 5.15 percent. (In full disclosure, EmigrantDirect advertises on my web site.) I also recommend ING Direct, which is currently offering a rate of 4.40 percent.

Both of these banks have raised billions in the last few years as a result of their high-interest offers, and as a result most of the national banks like Citibank, Washington Mutual, HSBC, and others are now offering online savings accounts. So check your local bank. To learn more about how to get a good deal on making your money safe, read my previous column, "Make Your Emergency Savings Automatic."

I hope my advice helps you or someone you love during a difficult period. Sometimes, the best thing you can do is listen when someone you love is hurting -- but some financial advice never hurts, and can often really help.