Among all the fears and worries of being divorced is finances. Many people feel insecure about money post-divorce, myself included. So when I read this article by CFP, Deborah Jacobson about how you can actually thrive financially after divorce (with some effort, of course) I thought it would be beneficial to my readers. Here is Jacobson’s article, which includes tips to thriving financially after your divorce:
Why Post-Divorce Is the Time to Thrive Financially By Deborah Jacobson
Without a doubt, going through a divorce is a tumultuous time. It can wreak havoc on you emotionally, physically — and financially. Yet the period after a divorce presents a unique opportunity for you to thrive and to regain your footing as you gain control back of your life — and your finances.
You should expect your income and your quality of life to drop after your divorce, as you will likely go from two incomes to one and/or one household to two. Instead of sharing expenses and having additional income, you will be paying for everything on your own — with your own income. But this gives you a unique opportunity to realign your priorities, and to get back on track with your financial goals. Here are some tips in thriving financially after a divorce:
Learn How to Budget
You may have already been living on a budget when you were married. If so, then this process will be less about learning and more about downsizing your current budget. But if you are new to the world of budgeting, then this process might be more challenging.
Budgeting doesn’t have to be complex: it is simply about balancing how much money you have coming in each month with how much money you spend and save. Start by making a list of all of your post-divorce income, which should include alimony and child support (keeping in mind that these items will not last forever). Next, list all of your fixed expenditures, such as mortgage or rent payments, utilities, student loan payments, insurance, car payments or other necessities. Figure out how much you have left each month, and how much you can devote to items like paying down debt, saving for retirement, saving for your kids’ education, and finally, fun/entertainment expenses.
Pay Down Debt
As part of your budgeting process, you should be thinking about any debt that you currently have, and whether or not you can trim some expenses in order to pay off your debt. For example, if you have any balances on your credit card, you should be thinking about what sort of “fat” you can cut from your budget in order to pay off that balance. If you have student loans, you can devote an extra $50 or $100 each month towards your debt to help pay it off more quickly and allow yourself to save for other goals.
The first step in paying down your debt is getting a good understanding of what debt you have. Make a list of your outstanding debts, including credit cards, mortgages, personal loans, student loans, and any other types of debts. You should include interest rates, loan terms and other information. From that list, decide on how to pay off the loans. Most financial experts recommend paying off the debt with the highest rate first, and working your way down the list from there.
Reevaluate Your Retirement Savings
When you were married, you likely had an idea of how you would save for retirement together. Now that you are divorced, it is time to consider how you will fund your retirement. Saving for retirement should be part of your monthly budget, along with putting aside some funds for emergency expenses and paying down debt. No matter how much you put aside each month, the key is getting money into a retirement account so that it can earn interest and grow over time, allowing you to have a more secure retirement. There are a few tools out there such as calculators to help you get a grip on your future plans.
Save for Your Kids’ Education
If you have children, then saving for their college education should also be a priority for you after your divorce. The topic of their educational funds should have come up during the divorce, but even if you didn’t save before the divorce, there is no reason why you shouldn’t start putting away money now. The earlier that you start saving for your kids’ college education, the more it will have a chance to grow and the less they will have to take out in student loans. Even if you can only put away a little bit each month, those savings will add up over time to help them pay for their degree when they are older.
In closing, learning to adjust and adapt after a divorce can be hard, but thriving financially is very much possible when you put your mind to it.
Deborah Jacobson is a recently divorced CFP from Southern California. She recently found Divorced Girl Smiling when looking for advice on the internet and has been an avid reader ever since. She hopes to start her own blog soon to serve as a diary for her to express her journey as well as to help women in her situation.