Starting Fresh: Managing Finances After Divorce
No matter how you feel about getting a divorce, it’s going to be disruptive to your life and finances. In most marriages, couples split the bills in some manner. Even if you don’t have joint accounts, bills, and responsibilities are divided. When it comes to divorce, you need to deal with the emotions that come with divorce, and you also have to untangle finances. Therefore, it’s important to understand what happens to your finances throughout the process. This article can help you set up your finances after divorce to get you in the best possible position.
Ways Divorce Impacts You Financially
No matter how amicable the divorce is, it’s never easy. There are long-term emotional and financial implications. The best way to prepare for the financial fallout is to know what’s coming and prepare for it. Many who have been through divorce state that they made numerous financial mistakes while going through a divorce. They also state that recovering from a divorce can take as long as five years.
You should prepare yourself for the fact that your income will be different. Instead of having a two-income household, you will have only one income. This is most likely going to impact your budget. If you receive child support or alimony, it could help. However, you may be paying financial support to your former spouse.
What to Keep in Mind
You should keep in mind that your bills are going to change. While they may decrease slightly, you are responsible for paying them yourself. Items to consider include health insurance, car insurance, grocery bills, streaming services, and utilities. In addition, you may have debt that you have to pay. Depending on the outcome of your divorce settlement, you may have to pay some amount of debt.
This means that your lifestyle needs to change. You may not be able to live the way you used to, at least not in the early months after your divorce. You should focus on understanding your income-to-expenses ratio. You may have to sell your house and find more affordable housing. You may need to start looking for ways to cut expenses.
Separating Your Finances From Your Spouse
It is easy to combine your finances with your spouse. However, separating them isn’t as easy. When you have a list of all the items you need to separate, you can get a clean break with as little damage as possible.
Some of the areas to consider are:
Joints Accounts
During the process of divorce, the assets and debts are divided. This means that your spouse’s name may be on an account you are taking ownership of. It could also mean that your name is on an account of which your spouse becomes the owner. This includes more than just bank accounts. It could also be a mortgage, car loan, or credit card. This also means they show up on your credit report, and if your ex-spouse doesn’t pay them, it will negatively impact you.
While you may have a divorce decree stating you’re no longer responsible for a debt, if your name is on it, it’s still yours. This means that you need to ensure your ex-spouse takes full responsibility for what is now theirs. Your ex-spouse may have to refinance the debt to remove your name. They may have to take out a new loan to pay off the old accounts. This is ideal for credit cards, car loans, and other bank loans. A mortgage could be a little more tricky.
Living Situation
When you and your ex-spouse own property together, you have to make some decisions. You can sell the property and split the money. Or one of you can keep the property. However, to do this, the person keeping the property must buy out the other person. The thought is the house is worth a specific amount of money, and you each are entitled to half the value of the house. This is, of course, after the bank gets back whatever you owe them.
The property must be appraised to determine the value, and then the house is refinanced by the person keeping the house. Then the buyer can give the other party what they are owed. This may also be an opportunity for you to find more affordable housing if you can’t afford the house on your own. Depending on how long you lived in the house, your best option may be to stay, but you should assess all of your options and make the smartest financial option.
How to Protect Your Finances After Divorce
You will have a new life after divorce. You will have independence from your spouse, which means you will handle all your bills by yourself. That takes some getting used to. You must pay all of your bills on time. You must pay the minimum payment by the due date. If your spouse physically paid all the bills, this may be new. You may need to create a calendar to know what bills are due and when.
You may want to consider bringing in more income. This could mean looking for a different job that pays more or provides a more flexible schedule. It could also mean looking for a side job to increase income. It’s always helpful to have more than one stream of income. That way, if something happens to one job, you still have some income coming into your household. You may need to take on a second job if you are trying to maintain the lifestyle you had before your divorce.
You want to make plans. When you are solely responsible for your finances, you want to ensure that you have a solid budget and retirement plans in place. You will no longer be able to rely on someone else for help.
Consider Your Income and Budget
Now that you are single, you want to ensure you have a savings plan. You should have enough money set aside in a savings account to pay your bills for six months. This is so you have money if you are in an emergency situation. You never know what will happen, and you must be prepared.
You may feel vulnerable after your divorce. This is common, but you can protect yourself from feeling that way again. First, however, you have to create a plan to do so. This includes continually putting money in a savings account so you have it when needed. You also want to create a retirement plan in case you are injured and can no longer work.
You should also check your credit score. It’s important to do this during and after the divorce is final. It’s hard to come out of a divorce without some financial impact, but you want to minimize it as much as possible. You also want to know the impact so you can work hard to correct it. This includes knowing your credit score so you can bring it back up. You also want to check to ensure that any accounts you had with your ex-spouse no longer show up.
Estate Planning
Going through a divorce means your estate plan should change. Your future probably looks a little different than you thought it would. If you have children, you should update your will. However, even if you don’t have children, you still need to consider estate planning and all the issues that still apply. For example, you should update or create a power of attorney for healthcare and finances. You may also want to create a living will. It’s probably in your best interest to work with an estate attorney to determine which steps you should take.
Need More Help?
You may still find it challenging to organize your finances after divorce, but you don’t have to figure it out alone. The Goalry Mall is here to help. If you are looking for ways to create and stick to your budget, the Budgetry store is the perfect place. There are videos, articles, and other ways to answer your questions. So don’t try to figure it out alone; check out the Goalry Mall today.
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Final Thoughts
Divorce can seem overwhelming even in the best circumstances. However, if you keep these finance tips in mind during and after your divorce, you can start over without a huge hit to your credit or wallet.