How to create a financial plan after a divorce
Sometimes an ending can be an origin, but that is up to us. Deconstructing your old life can be the perfect opportunity to rebuild into the person you’ve always wanted to be. This journey needs a foundation strong enough to build on and your financials are an important part of it. Now that you have your whole life ahead of you, smart planning is essential.
Make Sure You Are Financially Safe and Secure
It’s easier said than done, especially when divorce lawyers carry a high cost, but having an emergency fund and a safety net is paramount to any purchases. Limiting costs and responsibly splitting finances after separating until you can get a true assessment of your new cost of living will be helpful at every level. If you have the luxury of living with family or friends for a short period of time, take it.
Some items you may want to purchase after a big move to keep your documents safe is a new firebox for important paperwork and a safe. Some other things to consider are changing your passwords to everything, including social media as well as the security questions if you feel it is necessary.
Open New Accounts in Your Own Name
If you don’t already have them, open new accounts in just your name for everything from bills to checks. Comparing local credit unions and larger institutions you may even find some resources that they offer to help get you back on your feet with different programs or classes. It is also a good idea to open a new credit card in your name as well. This is especially true if you don’t have a very large safety reserve after all the lawyer’s fees and other miscellaneous costs.
Build a New Budget Free of Past Burdens
Expenses can wildly change after a divorce. If you were already frugal and financially responsible before then this won’t be a problem. If not, then there is no better time to learn how to keep to a budget.
Finding a new place to live can also increase or decrease your standard of living as well based on the location and the cost of the rent. There are plenty of tools available to help you more wisely spend your money.
This is also a good opportunity to invest in yourself. Build your new budget around a new gym membership and a healthier diet if possible. Finding new hobbies should also on your list of priorities.
Whether you pick up playing a sport, dance classes or even painting, focusing on yourself is always a healthy decision in times of great turmoil. One tip to help with self-care is to delete your social media. Disconnecting from any heavily used and shared platforms can go a long way towards healing from your experience.
Assess Your Assets
Physical assets are often cosigned and titled in both people’s names. Ownership of these will have been decided well before the end of the divorce proceedings. Insurance is one thing that you will have to change over to your name shortly if it wasn’t already. The same goes for your home. If you owned a house with your spouse then retitling it in or out of your name. You may also have new investments in your name that you have never seen before. If your spouse was more hands-on with investing than you were, you may want some extra help from a certified public accountant, commonly referred to as a CPA.
Reduce Debt if Needed
After divorce, adjusting to a new lifestyle is one of the hardest parts. If ends still can’t seem to meet even after building a budget and meeting with a financial advisor, reducing debt might be the best option. Having to choose which of your assets to sell is a tough decision and may mean a downgrade in some aspects. If refinancing your car note won’t have the needed effect you may have to sell it. The same goes for mortgages or substantial credit card debt. After fighting so hard to keep what’s yours, giving up those same assets may feel like an amputation but it is better than the alternative of bankruptcy.
In Case of Emergency Policies
Everyone should already be carrying life insurance by the time they get married. After getting a divorce, reassessing or changing your policy is a smart decision, more so when you have dependents who may have split living situations. Adjusting the beneficiaries is also a must at this point. If you had medical insurance through your spouse and lost coverage through the divorce, then you qualify for a special enrollment period and can apply through your workplace’s plan or find your own.
Your retirement plans should also be given a thorough once over by a financial advisor as well. Recent divorcees are allowed to withdraw from their retirement without the usual 10% penalty so if you needed for liquid funds to get on your feet, there are options.
Asking for Help Can Be Worth Its Weight In Gold
Friends and family are important and shoulders to lean on can be few and far between. You are bound to have complex questions and emotions related to the divorce, that’s why there are professionals for a reason. Any CPA that has been around for a while will know exactly how to help the most and where it’ll be needed. Tax projections are a big hurdle that should be tackled as soon as possible with the help of a CPA. Changes in your withholdings can throw off a budget and have large consequences come tax time.
Divorce has always been a large part of family law practices and public accounting firms, so CPAs and financial advisors tend to have tact and grace when working around these emotional situations. For many people, asking for help with finances is hard, and asking for help with mental health can be nearly impossible. Having a professional to talk through this transition may seem like it won’t help more than talking with your friends, but even friends don’t always know what’s best for us. There are also countless online and local divorce communities that offer great support for the best of times and the worst of times.
Life Goes On So Embrace It
It is easiest to change the most difficult habits when you already have to change another aspect of your life. You’re allowed to grieve, but this next chapter can be the first one in a long time where you are the sole architect of your own story. Embrace the change to build the best future you can. That dream of retiring to the Florida Keys may seem further away unless you see this period as an opportunity to create the most financially independent future possible.