Divorce is one of the most painful events a person can go through. Add to that all the formalities and difficult topics that have to be addressed and you have a recipe for an emotional crisis. That’s why it’s important to have plans in place to deal with things like finances that require thought and strategy so that you know exactly what you need to do and when you need to do it. Taking the pressure off yourself upfront could save you some mistakes down the road.
Hire a Financial Advisor
First of all, it is a good idea to hire your own financial planner as soon as possible. Most people think that their attorney will be able to figure out all their finances, but they usually don’t have the knowledge and expertise of a financial planner. That is not their field of study. Instead, you need someone who can dig into the couple’s finances and find out anything an attorney might have missed and calculate your long term needs efficiently.
Create a Divorce Planning Checklist
The best thing you can do is sit down with your financial planner and even your spouse, if you are on amicable terms to make a checklist of items that will have to be addressed pre and post divorce. Some examples of things you will have to deal with are:
- Closing joint accounts
- Separating bank accounts
- Contacting lenders
- Collecting important documents
- Listing your assets
- Establishing a budget
- Updating your will
- Updating your life insurance policies
Balance Your Budget
Your post-divorce budget may look a lot different than the budget you are used to. You may have gone from a two-income family to one. You may have had to relocate and shoulder more of the mortgage or rent payment on your own. You might even just be learning to handle the finances on your own if your spouse took care of it before.
Whatever the situation, you will need to create a budgeting plan that works for you now. The first thing you need to do is to list all your current income sources, including alimony or child support. Then you need to make a list of your essential expenses, including car payments, utilities and other unavoidable bills.
Now, compare your income to your expenses. If you are in good shape, you can start to add in luxuries or other fluctuating expenses you enjoy, such as movies, manicures, gym memberships, etc.
The important thing is to get a clear picture of exactly what your finances look like upfront so that if you need to eliminate expenses or find another source of income, you can look at things objectively.
You may have to live a little differently than you have been used to, but the situation certainly doesn’t have to be permanent.
Focus on Your Credit
Divorce doesn’t have to tank your FICO. Get a copy of your credit report from all 3 reporting agencies and check it for discrepancies. Make sure to contact any creditors who did not remove your name from accounts that they agreed to. Also, do your best not to go further into debt. If you need to open a credit card account to build or establish credit, do so responsibly. Only charge what you can afford to pay back quickly.
Create New Goals
Before you were divorced, you likely had financial goals that included your spouse’s income, retirement and plans. Now, you have a whole different future in front of you, but it doesn’t have to be scary. In fact, it can be exciting. You have a chance now to create any future you want and it all starts with a plan.
Your new goals should include anything that is important to you. For example, is your primary goal to buy a new home in 5 years? Or maybe you would like to travel more. Whatever those goals are, you just need to look at what it will take to get you there, whether it be finding ways to cut out expenses or bring in extra cash. New goals will give you a fresh perspective on your finances and help you stay on track.
Helpful tip: Studies show that people who write their goals down regularly are about 42% more likely to achieve them. Don’t just dream about your financial goals. Write them down!
This Does Not Define You!
The most important take-away from this should be that your divorce and your finances do not define you. Life situations are always subject to change, but that doesn’t have to be bad. Learning to budget and manage your finances better will help you gain control of your new life and make things so much easier in the future. No matter how you feel right now, things will get better and a solid financial plan is a big part of ensuring it.