There are several sides to a divorce that impact an individual’s life, not least of which is the impact it will have on your personal finances. Of course, family and children should be your number one priority, but protecting your financial means to care for them should be of near equal importance. The divorce process can be expensive, but in most cases you have a professional attorney there to guide you through it. However, after the process ends a lot of people struggle adjusting financially on their own with only one income and new responsibilities. Fortunately, some law firms have professionals on staff or the ability to refer clients to specialists that can help in these critical times. It’s important to note that every situation is different, but a few helpful tips to keep in mind can make the days that follow much easier to cope with, at least financially.
Revisit Your Budget, Make A Plan, And Stick To It
It is always surprising to see how few people forget to revisit their budget after a divorce and even more alarming are those that didn’t have one to begin with. Getting a better understanding of your new and possibly reduced income sources and creating your new budget is the first step. For two income households, the switch to a single income can leave an individual in financial shock after a divorce. Fixed monthly expenses that used to be divided into two can make discretionary dollars disappear when you are on your own. You may have been used to a more lavish lifestyle when part of a team but on your own it would be wise to cut certain luxuries until you get a firm grasp of your new financial situation. Whatever your situation, building a budget for your adjusted lifestyle and sticking with it can be the best way to ensure good financial health.
What Are Your New Future Goals?
In your multiple income marriage, you might have found things like retirement or a vacation home beginning to enter your mind when looking toward the future. Just because you are now divorced doesn’t mean these plans need to be scrapped, more than likely though your ability to achieve these goals will have to be adjusted. You’ll want to reevaluate your financial goals and determine what is more important to your long term and short term future. Many find that keeping a cash reserve well supported and easily accessible is an important lifeline to have during these uncertain times after a divorce. You may find yourself faced with rental deposits, court fees, or increased bills from carrying a mortgage and rent. Having a well-funded cash reserve can help alleviate these financial pains even if it means putting off the purchase of the beach house you’ve had your eye on in retirement.
Get Out Of Debt And Reestablish Credit
As you’re probably now well aware, divorce is expensive. Most people come out of divorce with debt that can make starting over fresh extremely difficult. Depending on your plan of attack, be vigilant in eliminating this debt and stick to the plan. Some choose to eliminate debt by paying down those with a higher interest rate first and then moving on to those with smaller rates. Others advise paying off small balances first to reduce the number of creditors coming to you each month and working your way up to larger balances. While a low score can hurt your ability to secure a good interest rate on a future purchase, financial advisers will warn you to be balanced in your approach to reducing your debt. It may seem tempting to liquidate all assets to pay off your debts, but this could be a critical error if you stretch your cash reserves too thin in the process. Many would agree that it’s better to have poor credit and a healthy bank account than having good credit and no cash on hand. Once you’ve got your debt situation under control, it’s time to look into ways to build up your credit again. If you did not manage credit well in your marriage, you now would have an opportunity to go forward on your own making better decisions to enhance your financial future.
About the author: Brian Levesque is a financial planner who gets a lot of recently divorced individuals trying to figure out how to make things work now that the income entering their house has been so drastically reduced. For those who are just about to start the process of divorce, or even those needing a good bankruptcy lawyer due to the resulting financial fallout, he recommends visiting www.lawofpct.com. You can learn more about Brian by visiting Google+.