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What to Do Financially After a Divorce

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Divorce can be emotionally and financially devastating.

Depending on your location and situation, you can lose as much as half of everything you’ve saved during the marriage over your lifetime, not to mention assets like your home, business and investments.

You also become responsible for 100% of your own living costs, which, post-divorce can include major expenses like legal fees, moving charges and additional childcare costs.

If, during your marriage, your ex was responsible for certain bills and made a habit out of missing payments, or if you were never listed on joint accounts, you could also be experiencing credit consequences – facing difficulties when applying for credit independently of your spouse, which can make it challenging to move on and purchase your own home or qualify for new insurance.

Rebuilding Your Financial Life

To rebuild your life post-divorce from a position of power, start by establishing your financial independence.

The first step is taking inventory of your financial life – assessing your cash flow, checking your credit and calculating your net worth – the total value of your assets minus the total amount of your debts.

Once you have a clear picture of your financial life laid out in front of you, you can begin the process of mapping out a plan to move forward.

For remaining joint financial obligations, like debt, work with your ex to make a plan for how those items will be handled.

In the meantime, keep making minimum payments so your credit doesn’t suffer. Once you come to an agreement, you may be able to restructure the joint debts in the proper person’s name with a simplified personal loan.

Separating Your Finances

In the meantime, you may want to close joint accounts so that you don’t become liable for any new debt your former spouse racks up post-divorce.

Separating your finances from your ex as soon as possible can ensure that your ex’s actions, or non-actions, won’t adversely impact you after the divorce papers are finalized.

Once you’ve made a plan for settling joint debts and closing joint accounts, be sure to put your own financial infrastructure in place – opening bank accounts and credit accounts in your own name and updating beneficiaries on your life insurance, 401k and IRA accounts.

This is also a good opportunity to reassess your cash flow. What new expenses do you need to consider now that you’re living on your own, and is your income enough to meet these new financial needs?

If not, what adjustments do you need to make?

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It’s important to be honest with yourself about your financial reality post-divorce and scale your budget to live within your new means.

Know that you may not be able to afford the same standard of living you grew accustomed to during your marriage.

If you and your children (if you have them) will depend on your ex for continued financial support, be sure you are all named as beneficiaries on your former spouse’s life insurance plan.

And if your divorce settlement agreement includes any lump sum payments, be sure to develop a strategy for properly managing those assets.

Alternatives to Emptying Savings

To cover the added upfront costs of life post-divorce like legal fees, moving costs and security deposits on a new place, consider a personal loan as an alternative to depleting the entirety of your emergency savings.

Once you’ve created a plan for covering your immediate costs, balancing your budget, establishing your own financial accounts and resolving joint debts, you can start looking ahead to the future you want to build on your own, creating a financial plan based on your new financial circumstances and goals.

Looking to the Future

Beyond paying your bills, saving and investing for your retirement, what do you want to achieve long-term?

Do you want to buy your own home? Do you want to fund your children’s college education? Do you want to take a year off of work to travel? What savings and investments will you need to achieve those goals?

Though thinking through these questions may feel daunting at first, especially if you weren’t actively involved in the family finances during your marriage.

But mapping out your next steps can be empowering and can remind you of the unlimited possibilities that lie ahead. When you’re in the driver’s seat of your financial life, you become the architect of your own future.