Divorce often brings substantial changes to a person’s finances, requiring individuals to reassess their financial goals, needs and wants and plan for a new future. It can be very challenging emotionally and sometimes physically to create a few financial life especially if there are less resources to work with. With thoughtful evaluation and planning you can be successful building your new post-divorce financial life. Here’s a comprehensive guide to help you navigate your finances after divorce.

Assess Your Financial Situation

• Inventory of Assets and Debts – Make a list of all assets such as real estate, vehicles, savings accounts, retirement funds, and investments and estimate the value. Make a list of all debts, such as mortgages, credit card balances, and personal loans. Take the sum of all assets minus liabilities and this will give you net worth. This is a number for annual tracking to get an idea of how you are doing financially.
• Income – Determine your total monthly net income (after taxes), including salary, alimony, child support, and any other sources of revenue.

Create a Realistic Budget

Once you have a clear picture of your financial situation, create a budget that reflects your new reality. Consider the following:

• Fixed and Variable Expenses: Identify your fixed expenses (housing, utilities, insurance) and variable expenses (groceries, entertainment). Prioritize essential expenses and identify areas where you can cut back.
• Emergency Fund: Allocate a portion of your budget to build an emergency fund, ideally covering three to six months’ worth of living expenses. This safety net will provide financial security in case of unexpected costs. It’s recommended to have 6 months of expenses in an emergency fund as a single person.

Understand Your Financial Obligations

Post-divorce, you may have new financial obligations, especially if you have children. Be sure to understand:

• Child Support**: If you receive or pay child support, familiarize yourself with the amount and duration of payments. Keep track of these payments and ensure they are documented.
• Alimony/Spousal Support**: Understand any alimony arrangements, including the amount, duration, and conditions for modification. Keep records of payments received or made.

Revisit Financial Agreements and Legal Documents

After your divorce, it’s essential to update any relevant legal documents, including:

• Beneficiaries: Review and update beneficiaries on life insurance policies, retirement accounts, and wills to reflect your new circumstances.
• Estate Plan: Consult with an estate planning attorney to update wills, trusts and financial/medical powers of attorney.
• Insurance Policies: Adjust health, auto, and home insurance policies as necessary, especially if your coverage was previously tied to your ex-spouse.

Explore Financial Resources and Assistance

If you are struggling to manage your finances or need guidance, consider accessing financial resources:

• Financial Advisor: A financial advisor can help you create a long-term financial plan, manage investments, and prepare for retirement.
• Support Groups: Join support groups for individuals going through divorce or financial transitions. Sharing experiences can provide emotional support and practical advice.

Focus on Building Credit

Post-divorce, you may need to establish or rebuild your credit independently. Take steps to improve your credit score:

• Open New Accounts: Consider opening a credit card in your name, ensuring you use it responsibly and pay off the balance on time.
• Monitor Your Credit Report: Regularly check your credit report for accuracy and address any discrepancies. This will help you understand your credit standing and identify areas for improvement. Consider setting up credit freezes with the 3 different agencies so that nobody can apply for credit in your name. You will need to unfreeze whenever applying for new credit.

Plan for Retirement

Divorce can significantly impact your retirement plans. Take the following steps to secure your financial future:

• Review Retirement Accounts – Understand how your divorce affects your retirement savings. If you received a portion of your spouse’s retirement account, ensure you understand how to roll it over into your own account.
• Adjust Retirement Goals – Reassess your retirement goals and make adjustments based on your new financial situation. Consider increasing contributions to retirement accounts if possible.
  

  Tax Planning

  Divorce can affect the taxes you will owe because you will no longer be filling jointly. Consult with your tax preparer to make sure you are withholding the right amount of taxes from income. If your estimated to get a large refund you may want to adjust your withholding through your employer so that you have that money to work with in your budget on a monthly basis.

Embrace Financial Independence

Post-divorce is an opportunity for personal growth and financial independence. Embrace this new chapter by:

• Setting Financial Goals – Establish short-term and long-term financial goals, whether it’s saving for a home, investing, or planning for travel.
• Educating Yourself – Take the time to learn about personal finance, investment strategies, and budgeting techniques. Knowledge will empower you to make informed decisions.