Financially Savvy Moves in Your Life After Divorce

Life after divorce usually presents financial challenges. This is especially true for women. According to The Marriage Project at Rutgers University, the first year after divorce a woman’s standard of living will drop 27% while a man’s will actually increase by as much as 10%!

 

Money management can often be overwhelming, especially if you did not have a proactive role in your family’s finances during your marriage, except to run your household. It is imperative that, as the head of the household, you now see your financial picture clearly and set realistic financial goals for a sense of control, security, and confidence in your life after divorce.

 

Here are some tips to enhance your “financial savvy”…

 

Investigate Your Credit

This is one of the most crucial parts of your financial picture! Your credit score will determine all future credit you are qualified for including a mortgage, credit cards, and even health and auto insurance. As a single woman, you will now be living on your own terms and with your own credit score. By law you are entitled to an annual free credit report form the three main credit bureaus. You can get this by going to www.annualcreditreport.com. Make sure the listings are accurate and that you deal with any of the negative items that may have followed you from your marriage. This may require diligently writing letters and following up with phone calls until your credit reports are as accurate as possible, but this inconvenience will be small compared to the price you can pay for poor credit scores. Make it a habit to be responsible and timely with all your future bills because you can no longer rely on your former spouse’s credit.

 

Establish A Realistic Budget

When you went through the divorce process you were probably required to submit an accounting of your household spending as part of your financial affidavit. Most likely you have a substantially different household income in your life after divorce. Establishing a new budget will not only enable you to live within your new means, but also allow you to find potential areas of unnecessary spending to pay off debt and begin to save for your future. As you develop your budget, include all annual expenses including mortgage/rent, utilities, food, auto & gas, in additon to home/ health/life insurance, potential home & car repairs, local/state/ federal taxes, and kids’ activities. Take your total expenses for the year and divide by 12 to determine your monthly expenses. If your monthly income does not cover your expenses, you will need to make some hard decisions of where you can cut back, at least emporarily until you can increase your income. To keep accurate records you may want to use Quicken or another financial management program.

 

Deal With Your Debt

Most women end up with credit card debt in their life after divorce. While credit cards can help you establish good credit with on-time payments, they can also get you into trouble if you are living beyond your means. As you outline your expenses, try to notice areas where you can “trim the fat.” We all deserve a little pampering, but there are always areas that add up! Are you spending $20 a week on Starbucks? Could you replace a girls’ nite out with a girls’ nite at home where everyone brings wine and an hors d’oeurvres? Use the money you save to pay extra toward your credit card payment. If you have more than one credit card, pay the extra payment toward the one with the highest interest rate and keep paying extra on that one until you have a zero balance. Continue to do this with each card until your credit card debt is paid off. In the meantime, try to pay for purchases with cash, check, or debit card. It will feel so empowering to be credit card debt- free!

 

Invest In Your Future

In addition to self-discipline, the best way to truly take control of your financial future is with the help of professionals. You may or may not have worked with a financial advisor during your divorce, but now that you are on your own your future depends on professional expertise and advice. A financial advisor will help you by developing strategies to achieve your short and long-term financial goals for saving, investing, college planning, retirement, and long-term care. An insurance  professional can give you your best options for health, home, auto, and life insurance. You may have had coverages with your former spouse, but with the help of a new professional you may be able to cut your expenses and you will be working with someone who only has a relationship with you. An estate attorney can help you update your will and educate you about life insurance trusts for your children. It is imperative that you update all beneficiary information on your estate documents including insurance policies, IRA’s, and your will to avoid your estate being left to your former spouse rather than your children, family, friends, or specified charity.

Investigating Your Credit, Establishing A Realistic Budget, Dealing With Debt, and Investing In Your Future…These are important habits for any woman to get into regardless of what the future may bring. As The Women’s Institute for Financial Education teaches, “A Man Is Not a Financial Plan!”