According to research done by American Psychological Association, between 40 and 50 percent of married couples in the United States separate. The divorce rate is higher for the next marriages of a divorcee. Not every pair settles their differences. Splitting is necessary.

Your finances are likely to take a hit during a divorce. You and your partner may have had different roles in managing your money while together. One of you could have been paying bills while the other took care of loans and savings. 

The separation will change your arrangement. You need to know how to manage your money after a divorce to cope with the changes. There are different ways of managing your finances. They are crucial for dealing with your money after the separation. 

These tips can help you rebuild your finances after a divorce.

1. Update Your Budget

Making a budget is a critical step to ensuring you spend your money wisely. Your income and expenses often change after a separation. The budget you develop should capture these changes. It should also form a roadmap you may follow to manage your divorce and finances.

sorting finances after divorce by budgeting, pie chart on a stock chart with a budget

a. Write All Your Expenses 

You should keep in mind that because of your divorce, some of your costs will reduce or remain the same. Expenses such as television subscriptions you keep will stay the same. However, others, such as transportation fees, will decrease as you are paying for only yourself. 

Some of those expenditures you had while married disappear. While listing your expenses, you may not capture some spending. This occurrence is normal, as you are readjusting. Try to be as imaginative as possible in your list, but you can update it as time progresses. 

Pay attention to expenses you do not pay every month, such as taxes.

b. Determine Your Total Income

Because of your divorce, you will only have your pay. The two of you may have an agreement on how to share proceeds from joint investments that you still have. You may add your fair share of these gains as part of your income.

c. Compare Your Income and Expenditure 

If your income is more than your spending, you will be in the right place financially. If your expenses are more than your revenue, you may need to make adjustments. For example, you can make an extra income. Part-time jobs and freelancing can be excellent options. 

You may also try to reduce your expenses. Let go of spending that you do not need. Sticking to your budget can be difficult. Consult a friend or family member to know if your budget is realistic. You should be open to criticism and consider their advice. 

One way to ensure you follow it is by capturing all your expenses. You may also place it in all the places you frequent. For example, hang it on your refrigerator door or in your bedroom to remind you. 

Monitor your spending regularly. This evaluation will help you know how you are progressing. It will also show you if you need adjustments.

2. Trim Costs

Cutting down on your expenses is an excellent way to manage your finances after a divorce. There is specific spending that you had because you are a couple. You may need to do away with them or reduce them. 

For example, if you remain with the home and it has a mortgage, consider downsizing the mortgage. The house is likely to have been spacious to accommodate the two of you and your kids. It may also have specific features that your partner needed more than you do. 

Move to a cheaper home or one without these features. Do not keep up with the lifestyle you had while together. Keeping up with this life can stress you and make you incur unnecessary expenses. It is normal to make changes. 

These adjustments are challenging but will enable you to create a future with financial freedom for you.

3. Evaluate Your Accounts

In your divorce settlement, you will have an agreement on how you will split your joint assets. The arrangement will capture these belongings.

  • Real estate
  • Liquid assets
  • Retirement assets 
  • Cash-value life insurance
  • Business interests 

You need to know what these items are worth. This knowledge will help you make informed decisions on what to keep and how to use them.

a. Understand the Details of Your Accounts

You should learn the monthly fees you pay for maintaining them. Look for options you may exploit to lower or eliminate these charges. You should also determine the returns they bring. 

protecting finances in divorce, Bill, Bank Account, Bank Statement

If they are returning little or no gains after the split, decide whether you need them. You may also need to make decisions, such as to remove your former partner as a beneficiary of life insurance policies, your will, or retirement accounts. 

b. Work on Your Credit Score

Once you close your joint accounts, you embark on a journey of developing your credit history. You may go back to an old account you had or open a new one. Improving your credit ratings remains crucial if you want to have access to a line of credit. 

A high credit standing has many benefits like low-interest loans and insurance covers with low rates. You may get a regular credit card or a secured credit card. A secured card is the right option for people with no credit standing or those with low credit ratings. 

You will need to have a cash deposit to get it. The creditor will keep the deposit if you do not make payments. It can be an excellent place to start. After a year or two, you can get a regular credit card. This card offers a higher credit limit and does not need a deposit.

You can improve your credit standing by not borrowing close to your limit and making timely payments. Bankruptcy and foreclosures are damaging to your credit score. You should also check your credit report frequently. This check will tell you where you stand. 

It may also reveal errors that you may want to correct immediately. The leading credit reference bureaus TransUnion, Experian, and Equifax provide these reports. They give them out for free once every year.

4. Update Your Documents

You must update your documents after the divorce. Your documents may influence your finances more than you know. For example, in case you die today, your former partner may be the one to inherit your estate. Their management will affect the wellbeing of your kids. 

Your documents may also guide the management your finances when you are no longer capable of handling them. Your kids choices will affect your money, which will impact your financial standing.

Many people forget to change their documents after the divorce. Make these changes as soon as you can. You may name your children as the beneficiaries of your estate. If they are still minors, appoint a guardian. 

This person will manage the assets for your kids until they reach 18 years. The guardian can be a friend, another family member, or an institution. Your advisor can help you pick the right person for this task.

5. Define Your Priorities and Goals

Once you get a divorce, you may need to examine your priorities and goals. The evaluation helps you determine what is important to you individually. You will know it by looking at the priorities and goals you had while married. 

The options you are still enthusiastic about after the split are likely to be your priorities. For example, if the two of you chose Hawaii as the place to establish your lives after retirement, it does not have to be the place you enjoy your life post-retirement. 

If you are still excited about Hawaii or it was your idea, you can remain with it as your vacation goal. You can plan for your vacation without going into debt. However, if you choose the place for your partner, you can now choose a place for you only. Pick a place you can afford.

If you have your goals or priorities you put on hold, now is the place to pursue them. For example, you can make the investment you wanted but could not for the sake of your marriage. Start a business to get the extra income. This time is ideal for pursuing what makes you happy. 

Try the things you have always wanted to try. However, remember your finances in all your engagements.

6. Plan for Retirement 

If you were counting on the retirement plan of your partner, start rethinking your strategy now. This trend is common for partners that take a part-time job or sacrifice their work to look after the kids. 

Your divorce agreement may give you a portion of your former partner’s retirement benefits. These proceeds may not be enough. You need your plan to ensure you can sustain yourself and your dependents.

how to finance a divorce through Retirement Planning

Determine the amount you need to lead a comfortable life after retirement. You may consult a professional to know this amount. This figure will inform your monthly contributions. The sooner you put money aside, the better placed you will be when you grow older. 

Beginning to contribute to your retirement plan early ensures you have a lot of money once you retire. You will put aside a lot of cash. Your contribution will also grow because of the interest it earns.

7. Refrain from Making Big Financial Decisions

A divorce may make you want to make big financial changes. Do not fall for this trap. Wait for the dust to settle before making any significant financial decisions. You do not see things objectively immediately after a divorce. 

You may need to sell the house quickly because it reminds you of the good times you had with your partner. This rush can make you do not get a good deal. Once you are comfortable with the separation, you may realize it was not worth it to sell your home.

a. Be Patient

If you still need to decide after you are comfortable with the split, make your choice. You will be more rational, which will cause good deals. Seeing things from different perspectives can help you realize that the reason you thought a decision was necessary immediately after the split was the wrong one. 

b. You Should Consult Your Attorney Before Making a Big Decision

An attorney will inform you whether the decision contravenes any standing orders by the court. The attorney can also advise you on whether the choice you make goes against any terms of your divorce. 

If your decisions contravene any of these agreements, you may find yourself in a lot of trouble, both legally and financially. 

8. Cover Your Kids

a. Ensure Your Divorce Settlement Looks After the Kids

If the arrangement does not provide enough upkeep to support your kids, you will need to find additional sources of income. The child support agreement should include a change in the cost of living. 

The economy will change, and prices may go up. The arrangement should be flexible to accommodate these changes. Get insurance for the support of the kids. If any tragedy happens, you will need to have the relief of knowing your kids are taken care of well. 

The parent responsible for child support should take disability insurance and life insurance. These policies guarantee that the payments continue regardless of what will happen to the provider.

b. Plan for College

Ensuring that your children get a quality education is critical for their future. Divorce settlements typically cover the expenses of the kids when they are minors. You can have an arrangement with your former partner that provides for the children’s college expenses. 

The kids are the responsibilities of both of you. Agreeing on something that prepares them for their adult lives should be easy.

9. Get Help from a Financial Planner

Many people have a say on how you should conduct your affairs after the divorce. You should leave the planning and advice to the experts. Listening to unqualified people in your life may lead you to trouble. 

You should take advantage of the many benefits financial planets offer to make the right decisions. 

Financial Planners Provide Several Benefits You Should Leverage in Your Divorce.

  • Financial Planners Are Knowledgeable. Financial planners know the finance world too well while your friends or family may have limited knowledge. They are familiar with concepts and techniques you need to establish your financial standing and improve it.

Consulting them enables you to use their expertise to stabilize your finances. 

  • Financial Planners Have Experience. Financial planners have dealt with many couples that split. This experience has shown them the common pitfalls that divorcees fall into financially. Engaging their services will help you avoid these pitfalls. 
  • Financial Planners Give Sensible Advice. Your friends and family will provide you with irrational guidance. Their knowledge of your former partner and feelings towards them makes the people close to you biased. 

You need an outside set of eyes to give you a clear perspective. Financial planners can offer you impartial advice. This guidance will help you make the right decisions after the split. 

  • Financial Planners Can Help You Live Within Your Means. A financial planner can help you make the changes after the divorce. Upon examining your current income, they determine the best way you can spend without jeopardizing your future. 

This guidance is important in ensuring that you lead an affordable life after the divorce.

Final Word

You need all the strength you have to get through a divorce. The last thing you need to worry too much about is how to manage your finances. Your finances are critical for your life after marriage. It is easy to ignore it, but it may have serious consequences. 

From low credit scores to struggling to sustain your changing experience, you need to avoid these outcomes. A divorce may signify an end to your marriage, but it can be the beginning of a new, happy chapter. 

You need to manage your finances after the divorce to make the best of this next phase. Managing your finances after a divorce ensures you and your dependents do not struggle financially after the split. 

Develop a budget and cut your expenses after the split. You should update your documents and understand your accounts. Change your financial goals and refrain from big financial decisions immediately after a divorce. 

You should get a cover for your kids and plan for your life after retirement. Financial planners can give you critical insights that can help you cope with your divorce financially. Leverage their expertise, experience, and logical thinking to smoothen your finances after the divorce. 


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