Each year, nearly 2.9 million men and women are put through the emotional and financial trauma of divorce. There only exist few other things that can disrupt people’s financial income like divorce. Carefully managing your finances can be a balancing act, and this is especially true for those who have just gone through a divorce. If you are recently divorced or about to be you are probably very concerned about the future of your financial strength. Regardless of your current situation, you have to redefine yourself financially once you cut the cord and that’s frightening for most people, and things can get even more complicated when divorce occurs after the age of 50. The loss in income will be likely greater than the drop in expenses. Studies have shown that after a divorce the standard of living of most men increases by 10% while that of most women decreases by almost 27% especially for those who have lost many years of career growth. It’s therefore very important to make smart financial decisions going forward so that you don’t get into any more debt than you might be in already. You may be concerned about handling tasks you did not have to deal with before, repaying outstanding joint debts, updating documents and making plans for the future.
Been typically concerned about their finances is common among the newly divorced singles and they want to make sure they have enough for their immediate needs, and that they’ll have enough when they retire. There are certain steps that can go a long way in helping to set you u after your divorce regardless of your financial state.
STEPS TO TAKE
Cancel joint accounts
If you already haven’t done this, you need to cancel and close all joint accounts with your ex-spouse immediately the divorce is official. Joint accounts that remain open are liabilities that could come back to do you harm. The last thing you need is to be on the hook after your ex-spouse runs up charges on credit cards or overdrafts a bank account. If currently you have a balance on a joint account that can’t be paid off such as a credit card, you will need to instruct the bank that you want to suspend the account to prevent future charges and after that confirm that the account cannot be reopened.
Draw a Budget plan
Having a budget plan is necessary in managing your finances after divorce. In essence a budget will help you by keeping track of all your income and expenses. There will be need for you to keep track of all your statements for utilities, rent/mortgage and all other regular expenses so as to better understand your income needs. Having a better understanding of where your money is coming from and going to will help you be in a better position to eliminate unwarranted expenditures. Having a budget also provides you with the structure you need to incorporate saving money for your future financial needs. Also, you can work with an independent financial planner to help you analyze your financial situation after divorce so you have an idea of what you should be saving for retirement, and also what your budget should look like.
Update your personal insurance coverage
After all divorce paperwork is cleared, contact an insurance broker and update your auto, home, and liability insurance coverage. Pay particular attention to the list of assets you scheduled on your homeowner’s policy. Jewellery, firearms, collectible and artwork are often listed, but some of those listings may no longer apply to you if your spouse received the items in question in the divorce, or if they were sold, to avoid paying insurance premiums for assets you do not own. For asset protection purposes, make sure you have an umbrella liability policy on yourself. It’s cheap, and I view it as very important.
Live within Your Means
Having to adjust to a different lifestyle and reduced standard of living is one of the toughest challenges that newly divorced singles face. Going from a two income household where you could depend on your spouse’s pay check to help cover bills to a single income home can make anyone’s head spin. As a single adult, you may have to learn to live on less money making it essential to restructure your spending habits. To put it simply, this means spending less money than your income. If you fail to learn this lesson you are bound to struggle financially making it impossible to reach your financial goals.
Create an income safety net
This is a common approach to personal finance, and building savings debt elimination is vital to your financial security. So, make all efforts to pay off any debts that you have incurred previously, while avoiding incurring more debt. Having a well structured savings account is the best way to avoid going into debt in future. Keep emergency funds in reserve to help you pay for unexpected expenses and allocate a certain percentage of your income to investments.
Seek and Accept available Assistance
Do not allow your new status as a divorced or single adult be a cause of shame or embarrassment. If you happen to be facing any form of hardships there are many government or community programs that have been created and designed to provide assistance to people facing these same circumstances. You may qualify for free or reduced cost health care coverage and assistance for buying food and other necessities.
It might seem hard to take it all in at first but I advice you take it one step at a time, the above list will go a long way in helping you rebuild your finances and set on the path to financial balance.