5 Keys to Money Management after Divorce
Posted under: Mind, Spirit, Career, Finances, Lifestyle
To say that divorce is hard on the finances is an understatement, I know.
I mean, the divorce settlement process itself is enough to make you scream. I was handing out thousands in attorneys’ fees, hers and mine, and we weren’t even at war all that much. But I had a stay-at-home spouse, a somewhat unusual situation these days, so what can I say.
But what is not unusual is that divorce is a sure path to damaging the financial future of both parties. In many cases, it not only damages finances but completely wrecks them. Post-divorce advice is typically centered on the emotional turmoil we go through.
While each of our circumstances will vary considerably, after the judge declares the financial settlement we need to get on with picking up the pieces. That means figuring out what condition the pieces are actually in. Here are a couple of things you might want to reflect on:
- Step back and survey the damage. Hopefully you have been kind of keeping a running tab while the negotiations are going on in the divorce. Who gets what house or car or membership and how much the monthly cost is for each of these, all have to be resolved. When the judge says the ‘amen’ over the settlement, then it’s time to add up the damages and make a plan. You may have legal fees to pay off and maintenance to your children and ex-spouse. I know it has taken more or less three years to stabilize the finances and get the assets growing faster than the liabilities. It takes time, a plan and some discipline.
- Prepare to absorb additional hits. If you once had two adult incomes and your expenses were pooled, now you’re going it alone. The same monies will now run two separate households. Adjustments will likely have to be made for a time. I had to refinance real estate loans, pay for dependent insurance for six months, alimony, and more. Got pretty pricey!
- Learn how to handle your money. Before the divorce, it may well have been your spouse took care of all the money matters. If so, it is now your deal. Most men really never learned how to shop for food or clothes, take care of bank matters, or deal with the cable or gas company. If the spouse reined you in before, now there is no such manager. If you’re not particularly good at managing investments and excess cash, then perhaps you’ll need to connect with an investment counsellor. Ask friends or responsible colleagues to give you a lead or two. Your future is in your hand as well.
- Change your financial information. Make sure you correct information on the assets and debts you had as a married couple. Credit cards, bank accounts, loans, pension accounts, insurance policies, your will, email accounts and more will need to be changed. If you and your ex are cooperative during this transition, you can have some time to get it done. Seems there is always some account or credit card that is discovered months later to still be in both names. Consider carefully whether to change the trustees on any funds you may have set aside for your children, too.
- Plan for the future. It is good to set out a year-by-year plan to guide decisions and to sketch in a future you want to create. I set up personal financial statements for the future, at minimum predicting my financial situation each January 1 for two years out. It motivates me to always be growing my net worth, reducing my debt and moving toward a solid cash reserve. If you were like me, cash was in very short supply for a year or so after the divorce. Oh, and I always seek to reduce my tax obligations through investment choices, lawfully of course.
If you're having a hard time getting a handle on your finances, there is a handy and free online software from Mint.com that might be just the tool for you.
Divorce can be emotionally tough, but it can be even more difficult financially. We each have a limited inflow of money and it is time to make it build a sustainable future, and an enjoyable one. It will take us some time, discipline and patience to get back on our feet. Life may not revolve around money, but it sure seems like it for quite a while after the divorce.