Between forty to fifty percent of all marriages end in divorce. Maybe you have gone through it, or chances are, you know someone who has, you don’t need me to tell you how financially devastating divorce can be. Many people lose half of everything they’ve saved over their lives. Considering the high cost of legal fees, even more money is depleted. Sometimes the home needs to be sold, retirement accounts split up, investments divvied up, basically every asset you own. If that doesn’t sound bad enough, divorcees often see their income go down while their expenses go up. No doubt about it, divorce is terrible news financially.
Even though this looks bad, don’t worry, there are plenty of things you can do to improve your financial situation significantly. If you have gone through divorce recently, here are seven things you can do now to help yourself get back to some level of normalcy as quickly as possible.
Do Not Panic or do anything irrational. This is easier said than done for obvious reasons, but you need every ounce of energy you can keep to rebuild your financial life. Don’t waste time worrying, and taking no actions, it won’t get you anywhere. Also, please know that you are not alone, there are many ways you can use to turn things around. You have many choices, many avenues, and as bad as it may look right now, you probably aren’t going to be out in the street or penniless.
Take stock of Your Financial Life. You may have never needed to, or may not understand what stocks or bonds are, or what a mutual fund is right now, but in time, you will improve your knowledge. At this moment, it’s time to account for where you are and that means painting the full picture of your financial life; income, expenses, assets and liabilities. My suggestion is to either use Excel or Google Sheets to catalog everything. You can create four sheets, one for each category. Sites like Mint.com also can help you with this. It’s great to have one place where you literately can see a snap shot of your financial life. Lastly, take a look at your credit report. Both spouses most of the time take a ding when they get divorced, so it will give you a good starting point to repair your credit.
Time to balance Your Budget. This is a priority. After a split, it may take you time to adjust to your new lifestyle with the income you take in alone and the expenses you need to payout. If you are not careful you could put yourself into more debt during this period. Work as hard as you can to not let this happen. If you don’t know what you spend on average right now, start keeping track. This is the most important piece of financial information you can have. With it, you’ll know if you need to cut back or go back to work or if your situation is sustainable. If you figure out that your spending exceeds your income, it may not make you happy, but ignoring a bad situation doesn’t make it go away.
Start naming Priorities. Divorce often comes as a shock after many months/years of trying to make it work. When people have too much on their plate they can easily become overwhelmed and then freeze up. That’s understandable but dangerous. If you determine that you don’t have enough income to make sure your bills are paid, this has to be your number one priority. If you depend on your ex-spouse for continued support, make sure they are required to buy life insurance and name you and the children as beneficiaries. If budgeting isn’t the biggest problem, phenomenal. What do you want to focus on? Improving your finances? Finding new work? Moving? Make yourself a list of everything you want to do and discuss it with your objective friend in order to come up with an action plan and time frame. A goal without a time frame is just a dream.
Start building your financial team. In picking yourself up financially, you can do a lot of this yourself, but you don’t have to. Don’t be shy about getting expert tax, legal and financial advice. Of course, you want to get referrals from trusted sources but don’t stop there. Make sure your team empowers you and makes you feel comfortable. It’s their job to make sure you understand what they propose doing and why. Make sure they are all on the same page with you. And remember, It’s your money. If you feel intimidated or confused, go to someone else. You have the right to expect a professional and supportive team.
Now is the time to learn. By taking inventory, balancing your budget, creating a priority list and assembling a strong team, you’ll learn a great deal about finances in general. But keep the wagon rolling. Devote 20 to 30 minutes a day to expand your education. Ask questions, attend webinars and seminars. Never stop learning. You will learn something new every day.
Lay out a Plan for your future. By now you’ll be well on your way to a more solid financial house than when you first divorced. Now is the time to create a financial plan for yourself with your new lifestyle. Take broad strokes; Do you want to have a yearly vacation? Do you want to own a home? Do you want to save for retirement? A financial plan tells you where you will likely end up if you continue on your current path and what you might consider doing differently in order to have a different outcome. If you have a financial advisor, you should already have a solid plan you can refer to.
These seven steps won’t change your life as quick as you may want, but by taking it one day at a time, and doing each of these steps, things will improve. If you need a hand, ask for help from people you trust and who care about you. You don’t have to rush, there is nothing here you can’t do. You’ll see that rebuilding your life after divorce isn’t as bad as it seems.