Rebuilding Your Finances After Divorce
After a divorce you can feel like you’re completely starting over, whether it’s in terms of a new relationship or your finances. Aside from the emotional components of divorce, financial concerns are one of the most challenging parts of a divorce for many people.
You may find that you’re paying a substantial amount of your income toward alimony or child support, or maybe you no longer have a comfortable retirement stashed away.
Regardless of your individual circumstances, there are some basic steps to start rebuilding your finances, and again begin securing your future.
Don’t Neglect Retirement
Once you divorce you may have to rethink your retirement savings, based on the amount of money you’re spending on child support or alimony. You’ll also have to consider the hit your income will take if you’re losing your spouse’s supplemental income.
Despite the negative impact divorce may have on your wallet, you still need to be diligent about saving for retirement.
Depending on what your spouse took during the divorce, you may have to also work on investment strategies that will provide diversification and balance to your portfolio.
Know What You’re Up Against
If you were a stay-at-home mom or dad, checking your credit post-divorce becomes particularly important. Many spouses who spent the majority of their marriage not working outside of the home often discover they have no credit history.
Check your credit report immediately to determine where there may be weaknesses or issues you need to address.
Evaluate Your Budget
Many people have difficulty accepting the fact they need to change their budget to reflect their current income and finances.
It’s imperative you’re realistic about your finances after a divorce, so that you can create a new and appropriate budget based on your present situation.
People often find it emotionally difficult to adjust their lifestyle after a divorce, but the reality may be that you have to sacrifice some things, and it’s best to do that as soon as possible, so that you can start rebuilding your finances for the future.
You may also have to shift how you spend on your children. It’s common to hear about divorced parents overspending on their children to compensate for the guilt they feel about the divorce, but your kids are going to have to readjust to a new lifestyle just as much as you will. Overextending yourself to give them everything they want isn’t going to be beneficial for anyone in the future.
Review Your Estate
After you divorce, everything in your life changes, and this should be reflected in your estate planning. If you don’t update your life insurance policies and other documents regarding beneficiaries, these may go to your former spouse in the event of your death. If you leave your spouse with a bequest in your will, then after the final divorce judgment, that bequest is voided.
Often in a marriage, one spouse handles the finances and the other spouse may have little or no knowledge of the intricacies of the money issues in the household.
If you’re the spouse who shied away from financial dealings in the past, it’s important that post-divorce you begin educating yourself and taking control of the situation. You can no longer remain passive or uninvolved, and the sooner you start learning and taking the reins, the faster you’ll regain your financial footing.
Divorce is difficult in so many ways, but you don’t have to be completely derailed by financial issues if you’re willing to do the work required to get things back on track.