Starting Over Financially After Divorce
Starting over financially after divorce can feel overwhelming on numerous levels. If you are recently divorced, you could still be handling your legal bills related to the divorce. Besides, you are likely trying to manage your expenses on a lower income than what you're used to while only seeing half your assets when you open your investment statements.
5 Tips for Starting Over Financially After a Divorce:
If you walked away from your marriage with debt, look at ways to reduce your interest rates or reorganize to eliminate it. If you can't eliminate it right away, begin paying it down aggressively. Your monthly cash flow will be so much stronger if you're not paying down debt every month. When I am working with people on their divorce settlement, we often look for creative ways to eliminate the debt for both parties so they can each have a fresh start.
Evaluate Your Income
Sit down and do the math. Figure out if you can support yourself financially with the dollars you now earn. Remember to include other funds that will be coming in, like child support, alimony, or stock dividends.
Take action if you need to. If you’re going to need a new or different job or additional income, start doing something about it right away. If you begin bringing in extra dollars right away, it’ll take some of the pressure off later.
Reduce Your Expenses
Start by determining your monthly expenses. How much are your monthly outgoing expenditures? Can you count your basic expenditures on one hand: mortgage or rent, car payment, utility bill, food costs, and phone/internet charges?
For the other hand, you’ll have insurance, entertainment, and savings. If you have a lot of monthly payments like 2 or 3 credit cards and more than one car payment, it’s time to consider spending cuts.
If you need to reduce your spending, be thoughtful about what you’ll cut out. Maybe you can sell one of the cars to eliminate a car payment and reduce your car insurance. Perhaps you’ll decrease cell phone charges or cut out paying for your phone landline.
Maybe you can combine your 2 or 3 credit card payments all onto one card for one monthly payment for everything you owe. If you must, cancel your Netflix account or whatever other accounts you can do without, at least for now. Once you have your expenses under control and know how your money situation will be, you can add back services you want.
Be Honest With Yourself
Are you living equal to or below your means financially? Do you and your child really need to live in a 2,700 square foot home? Or could you be perfectly happy in a home that’s half the size? Consider this: you’d be paying half the electric bill (you now pay) every month plus lower rent.
Once you get some time as a single person under your belt, you can upgrade your standards later. The point is to ensure you’re not living right up to the edge of what you make. If you are, it can make for a rather nerve-wracking life. With some planning, you might be able to reduce your expenses and still live a financially comfortable life.
Related post: Why You Need to Work with a Divorce Financial Advisor
Rebuild Your Retirement
Take care when splitting up retirement funds. This issue gets sticky. Talk with your Certified Divorce Financial Analyst (CDFA) about the best way to handle such funds because, depending on your age and how you do it, you might have to pay early withdrawal fees plus taxes on the withdrawn amount. There are ways to do it without paying these penalties.
When it comes to making it through a divorce financially, recognize millions of people have survived it, and you can, too. Recall the toughest times you’ve had and realize the financial smarts you possess to get through. If you follow the above suggestions, you’ll be well on your way to successfully starting over financially after divorce. You’ll be okay.
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