Finances After A Divorce
You’ll Be Okay: Financially Adjusting to Divorce and Thriving
Let’s be honest, divorce sucks, BIG TIME. If you are in the middle of a breakup or even considering one, you might feel like you’re in an emotional whirlwind. You’re worried about your future, your kids (if you have them) and having no money after divorce. Financial reasons are often the ones that keep people stuck in bad relationships for way too long. This article gives you some steps to take to rationally look at finances but remember this-there are people with much less than you who are doing ok. Take a deep breath, dive in, do the work and remember you are capable of building a life you love.
2.Do the math. Figure out if you can support yourself financially with the dollars you now earn. Remember to include other funds that will be coming in, like child support, alimony, investment income or stock dividends. One note of caution-temporary sources of income like child support and alimony should NOT be part of your long term financial plan.
2. Act now. If you’re going to need a new or different job or additional income, start doing something about it now. If you begin bringing in additional dollars right away, it’ll take some of the pressure off later. If you have the bandwidth, this is a good time to start that side hustle you’ve been thinking about. Create as many additional sources of income as possible to soften the financial changes that may happen.
3. Determine monthly expenses. How much are your monthly outgoing expenditures? Can you count your basic expenditures on one hand: mortgage or rent, car payment, utility bill, food costs, and phone/internet charges?
For the other hand, you’ll have insurance, entertainment, and savings. If you have a lot of monthly payments like 2 or 3 credit cards and more than one car payment, it’s time to consider some spending cuts.
Make sure to check out my FREE BUDGETING WORKBOOK to start you off!!
4. Don’t panic. If you need to make some reductions, decide what you’ll cut out. Maybe you can sell one of the cars to eliminate a car payment and reduce your car insurance. Perhaps you’ll decrease cell phone charges or cut out paying for your phone land line. While all of this is greatly simplified, you get the general idea-
Maybe you can combine your 2 or 3 credit card payments all onto one card for 1 monthly payment for everything you owe. If you must, cancel your Netflix account or whatever extra accounts you can do without, at least for now.
Once you have your expenses under control and know how your money situation will be, you can add back services you want.
5. Take an honest look. Are you living equal to or below your means financially? Do you and your child really need to live in a 2,700 square foot home? Or could you be perfectly happy in a home that’s half the size? Consider this: you’d be paying half the electric bill (you now pay) every month plus lower rent.
Once you get some time as a single person under your belt, you can upgrade your standards later. Lowering your living standards out of your comfort zone can actually be incredibly freeing. The things you think you “need” you may realize really represent your wants. You can begin to mindfully construct your life in a way that is full of fewer, but more meaningful, items.
The point is to ensure you’re not living right up to the edge of what you make. If you are, it can make for a rather nerve-wracking life. With some planning, you might be able to reduce your expenses and still live a financially comfortable life. You can also simultaneously look at your earnings and haw to grow your sources of income.
6. Heads up regarding your tax return. If you’re not yet divorced as of the last day of the year (12/31), you can still file jointly if you both agree to do so. Also, if you’ll have custody of your children the most, ensure your attorney declares in your divorce decree that you can claim them as dependents.
If you’re paying alimony, have your attorney include that in your decree. This way, you can claim the amount you pay as a tax deduction.
7. Take care when splitting up retirement funds. This issue gets sticky. Talk with your attorney about the best way to handle such funds because, depending on your age and how you do it, you might have to pay early withdrawal fees plus taxes on the withdrawn amount. There are ways to do it without paying these penalties.
When it comes to making it through a divorce financially, recognize millions of people have survived it and you can, too. Recall the toughest times you’ve had and realize the financial smarts you possess to get through. Even if you have made some questionable financial decisions up until this point, this can be your time to change your future. The thing with major life changes is that they open doors to new possibilities. By catching the motion of the change started by the divorce, you can start to change other areas of your life that you have been less than happy with.
Divorce is not the death of a marriage, it’s the birth of your new life. Finances can be incredibly scary when you are suddenly facing them alone, but I PROMISE YOU, you’ve got this!!
