Divorce is more than a separation of two people in a relationship—it involves more financial concerns than one might think! You likely endured the long-lasting battle of distributing assets, debts, and bills. Once it’s over, you might end up with more financial problems than you had during your marriage. That’s precisely why it can be overwhelming if you do not know how to start over financially after divorce.
However, we can help you get started with your new financial journey by providing tips. If you are facing problems due to single income or lack of ways to pay off debt, these tips may help you change the course of your life!
Tips on How to Start Over Financially after Divorce
1. Create a New Monthly Budget
While your household expenses may have been manageable while you were married, it’s a whole new world after a divorce. Your monthly budget may not be the same as it was before, and you need to come up with a new budget that can support your monthly expenses. To start with a new monthly budget, you need to jot down your income and expenses and then work on balancing the two.
2. Match Your Expenses with the Income
Lowering your expenses is crucial for your new budget, especially if you are new to surviving financially after divorce. Once you realize that the income is not the same as before (assuming there were two wage earners in the home), you can figure out what expenses can be eliminated or reduced. This way you can make room for the expenses you actually need, such as your home mortgage or rent and car payment. It’s not difficult to find the expenses you need to reduce—simply check your bank and credit card statements for the past few months and highlight transactions that were not necessities.
3. Get the Full Financial Picture
To create a new budget for surviving financially after divorce, you need to calculate your net worth. It’s the measure of the difference between your assets and liabilities. It might help if you had been tracking your finances before the divorce, so you’ll know the before-after situation once you calculate your new net worth. If you haven’t been tracking, that’s fine too—as long as you have your post-divorce income and expenses in front of you.
…prioritize building a savings account as part of your new financial goals.
4. Create an Emergency Fund
Your divorce may have wiped out some or all of your savings, and the new reality requires you to have a different emergency fund. Therefore, prioritize building a savings account as part of your new financial goals. It can help you put your mind at ease about your financial situation and minimize your stress. A good way to build an emergency fund is to keep 3-6 months of expenses in your account (reserves). This may take time to build, so start off small and try to put as much as you can into your reserve fund!
5. Formalize a Plan for Debt Payoff
It may be your old student loan or credit card debt you took during the divorce. You should create a plan to start paying down your debts, when feasible. With new expenses coming your way and a paired-down income, you may not be able to pay off the debt quickly; however, create a plan now to help you stay on track! You can search online for different ideas on debt payoff methods and shortlist those that may suit your financial situation.
6. Rebuild Your Credit
Your credit might have taken a hit after the divorce, so invest your time and efforts into building a good credit score that can benefit you in the future. Be sure to make your monthly payments on time and manage your credit utilization at or below 30% to increase your credit over time.
It can be difficult at first, but eventually, you can learn how to start over financially after divorce. Make sure you don’t get discouraged in the face of minor setbacks and let your perseverance guide you through the financial limitations. You should not be afraid to experiment with different methods to improve your financial situation, pay down debt, create an emergency fund, and improve your credit score.