Dealing with the emotional and practical consequences of a divorce can be overwhelming, and it's common for people to feel a sense of loss and confusion about their financial situation during this process. That's why it is so important to prioritize your financial well-being during this time and to take proactive steps to help rebuild your financial life. Doing so can help you move forward with renewed stability and confidence in your new life.
Divorce can have a significant impact on an individual's finances. The outcome of a divorce settlement can significantly affect an individual's long-term financial situation, which is why it's so important to work with an experienced divorce attorney who can help protect your interests throughout the process. Decisions about asset division, alimony, and child support can impact your ability to adequately care for yourself and your children in the present and to invest and save for retirement in the long term.
In this blog, we will discuss 5 financial decisions you can make to help rebuild your financial future after divorce:
#1. Create a Budget
So much changes during a divorce, and those changes can feel especially daunting when it comes to something as critical as your finances. These changes can be still more overwhelming if you were not accustomed to managing your household finances alone. While many couples divide the labor of managing finances during a marriage, one person often has the primary responsibility for budgeting and financial decision-making.
Whatever the norm in your marriage, learning to create a budget can help ensure that you are living within your means following divorce. By creating a financial plan, you can understand your new expenses and income levels and prioritize what matters most to you.
Tracking your expenses and income is a fundamental step in creating a budget after a divorce. It's essential to know how much money is coming in each month and where it's being spent to make informed financial decisions. By tracking your expenses, you can identify areas where you may be overspending and make adjustments in your budget accordingly.
Tracking your income can ensure that you have enough money to cover your essential expenses while still having some left over for saving or investing. There are many tools and resources available to help you track your expenses and income, including mobile apps, spreadsheets, and financial planning software.
The benefits of following a budget post-divorce go far beyond just gaining control over your finances. By managing your expenses, you can reduce financial stress and anxiety, avoid excessive spending, and plan for a more stable future. Establishing a budget is a crucial step in regaining control over your finances and setting yourself up for a more secure financial future.
#2. Create an Emergency Fund
Going through a divorce often comes with a range of unexpected expenses that can quickly put a strain on finances. These expenses may include legal fees, moving costs, or even unexpected house repairs or medical bills - many people find themselves unprepared for these costs.
At the same time, the instability and upheaval of divorce can impress upon some the importance of having financial security and independence. Having an emergency fund can be an important step to help ensure that your post-divorce life is financially stable and secure and that you are prepared for unexpected expenses in the future.
To begin saving for an emergency fund, a great first step is to explore automatic savings programs. These programs make it easy to save small amounts on a regular basis without even having to think about it. Another effective strategy is to create a budget that includes a specific line item for your emergency fund. By budgeting for this account, you can prepare for unexpected expenses and work towards a specific savings goal.
Cutting back on expenses is another great avenue to save money for an emergency fund. This could include anything from eating out less or reducing certain entertainment. Additionally, seeking out additional income streams can help boost your savings, such as taking on freelance work or selling items you no longer need.
A good rule of thumb for emergency savings is to aim for three to six months’ worth of living expenses. This sum provides a cushion to cover expenses while still allowing you to maintain your current lifestyle during unexpected financial emergencies.
#3. Manage Your Credit
Managing and protecting your credit following a divorce is a crucial step in protecting yourself and your financial standing. The end of a marriage can result in significant changes in financial status and credit score. It is essential to manage your credit effectively to protect yourself against potential negative consequences.
It's important to communicate with your former spouse regarding shared debts and financial obligations during the divorce process. Failing to do so can lead to missed payments and negative marks on your credit report. This can negatively impact your ability to obtain loans or credit in the future.
One of the most important steps you can take to protect your credit during and after a divorce is to monitor your credit reports regularly. Examining your reports closely can help identify any errors on your accounts, so you can dispute them and avoid having inaccurate information affect your credit score. You will need to ensure that your name is removed from any joint accounts so that you do not end up being responsible for any debt accrued by your former spouse.
Paying your bills on time is another important aspect of protecting your credit after a divorce. Late payments can negatively impact your score and creditworthiness. Try setting up automated payments to ensure that bills are paid on time. Avoid taking on more debt than necessary by living within your means and avoid opening too many credit cards or loans at once.
#4. Invest for the Future
Divorce can bring about major changes to your long-term financial situation, so it's important to think carefully about how you want to move forward with investing for your future. Creating a plan for retirement is particularly important as divorcees tend to have fewer years to save for retirement than married couples.
Because assets such as pensions, investments, and retirement accounts may have been divided as part of your divorce settlement, you will need to take stock of what you have and where you’d like to be in terms of retirement planning.
When it comes to investing following a divorce, there are a few key steps you should take. The first is understanding your current financial situation - know the assets you have remaining after the divorce settlement and determine whether they cover your short-term needs as well as long-term goals such as retirement savings.
The next step is building an investment plan that works for you given your individual circumstances. Consider seeking out advice from a financial advisor who can help review your finances and build an appropriate investment strategy for achieving your long-term goals. An advisor can also guide you through asset allocation decisions based on risk levels and make recommendations about which types of investments may be right for you.
Finally, make sure to regularly monitor your investments and adjust them as necessary. As always, it's important to keep an eye on the markets and stay up to date with any changes that could affect your investment portfolio.
#5. Prioritize Insurance Coverage
Insurance is another critical aspect of financial planning for a post-divorce life. Home, auto and health insurance are essential in providing financial protection against the costs of accidents and medical treatments that may arise following a divorce. Life insurance can also help provide security for children from the marriage who may depend on one or both parents financially in the future.
It's important to consider all available options when selecting an insurance policy after a divorce. A financial advisor or insurance agent can be a great resource in helping you navigate the decision-making process and select an appropriate policy.
In addition, there are other types of coverage that may be relevant for your post-divorce life. Disability insurance can provide necessary financial protection should you become injured or ill and unable to work. Long-term care coverage can help cover costs associated with medical treatments such as physical therapy or nursing home stays in later years.
Having adequate insurance coverage is essential for protecting yourself financially following a divorce. Taking the time to understand your options and make informed decisions about which policies are right for you will ensure that you have access to the coverage necessary to protect yourself and your family in the years ahead.
Rebuilding your financial life after a divorce can feel daunting, but by taking proactive steps such as creating a budget, establishing an emergency fund, managing your credit score, investing for the future, and prioritizing insurance coverage you can set yourself up for a more secure financial future. It may take time to adjust to your new financial situation post-divorce, but having these plans in place is essential for protecting yourself financially and helping ensure that you have access to the resources needed to live comfortably and securely in this next phase of life.
The best way to protect yourself and ensure a more secure financial future is to seek the counsel of an experienced attorney. Divorce can have significant financial repercussions, some of which may not be immediately apparent. An experienced attorney can help you understand your rights and obligations and ensure that your interests are protected throughout the process.
At Samuelson Hause PLLC, we understand how important it is to have a trusted divorce attorney by your side. We can help provide you with the peace of mind of knowing that any legal issues that arise during or after a divorce will be handled appropriately. We want to help you move forward with confidence so that you can build a secure financial future for yourself post-divorce.
At Samuelson Hause PLLC, we understand the financial and emotional challenges that can arise during a divorce. Our experienced attorneys can help protect your rights throughout this process and ensure that you have access to the resources necessary to rebuild your financial life after divorce.
Contact us online or call us at (516) 584-4685 for more information about how we can help you in this difficult time.