Among the more damaging side effects of divorce is its impact on finances. All too often, dissolution of a marriage can lead to financial struggles and significant debt. However, with careful planning, you can create a light at the end of the debt tunnel. A recent article on The Ascent provides a roadmap for navigating post-divorce finances.
- Adjust your budget: It is recommended that an honest review of your income and spending habits take place as soon as possible. Even higher earners will have added costs incurred as a result of divorce, which, in combination with diminished household income, means less money for spending.
- Make a plan for debt: Legal fees and other costs incurred as a result of divorce can lead to debt. It is important to address this with a proactive payoff plan. One immediate consideration could be to refinance debts – such as with a balance transfer or personal loan - to minimize overall costs and interest. Prioritizing those payments and remitting higher sums whenever possible will not only remove the debt sooner, but also result in a lower overall amount of interest paid.
- Establish your credit: A sound credit history is essential to operate in today’s electronic society, not to mention to buy or rent a home. If you did not have credit in your name during your marriage, a secured credit card is one way to begin building a positive credit profile. For those who primarily carried credit during the marriage, you will want to remove your former spouse’s name from those accounts. Also, joint loans should now solely reflect the individual responsible for payment.
- Adjust tax withholding: Notify your employer to adjust your withholding status immediately, so that you do not face any surprise payments come tax time.
- Review healthcare coverage: If your healthcare insurance was provided by your spouse, you will need to secure new coverage. Conversely, if you were carrying your former spouse on your policy, you will want to remove them from the plan.
- ID ways to access additional income: That longtime hobby might actually add income to your household: consider side-gigs or any type of additional revenue sources that can help keep you happily busy and cushion your budget.
- Set new financial goals: While facing immediate debts can be distracting, do not neglect long term planning, such as saving for retirement or setting up an emergency fund and setting monthly goals to meet these payments.
- Seek help: It might be worth considering seeking the help of a financial planner to identify other avenues of assistance available to you.
These steps are an excellent start in assessing and addressing a post-divorce financial situation. As experienced divorce attorneys in Bucks County, we have seen many people emerge from divorce to get back on their feet and achieve financial freedom. If you need advice or assistance as you move into divorce, call us at 215-340-2207, or email email@example.com.