Moving Forward after Divorce
After a divorce, you have a unique opportunity to revisit your financial plan. Making sure your finances are on track will help you put the past behind you, and provide a foundation for the future.
Understand where you are and where you're going
When you're single, your financial needs are often very different than when you're married. As you adjust to life after divorce, you may naturally focus on your family's day-to-day needs, but don't neglect your long-term finances.
A few tips to help you begin planning:
Gather information about your savings and investments, including retirement accounts, so that you know exactly where you stand.
Draft a realistic monthly budget so that you have a plan that reflects your current income and expenses, not your former lifestyle.
Reevaluate your financial goals. Do you have new goals (e.g., going back to school)? Given your new circumstances, is your retirement planning still on track?
Reassess your insurance needs. Has your need for life insurance changed? Is your health insurance adequate? Do you have the right amounts of property and liability insurance?
Review your beneficiary designations on your life insurance policies, retirement accounts, and bank or credit union accounts. Update your will.
Take a look at your tax situation. Your income sources, tax filing status, and the credits and deductions for which you qualify will likely change as a result of a divorce, so review your tax situation as soon as possible (a tax or financial professional can help).
Control your credit and debt
After divorce, your spending patterns--and habits--will likely change. For example, you may feel freer to spend money now that you're in charge of all financial decisions, or you may have trouble adjusting to a new budget. If divorce has affected your credit rating, you'll need to take steps to rebuild your record.
A few tips to help you manage your finances:
Resist the temptation to rely on credit cards to provide extras. The short-term gain isn't worth the long-term pain of paying off mounting debt.
Order a copy of your credit report and check for inaccuracies. Does it reflect joint accounts that have been closed or refinanced, or name changes? Continue to monitor your credit, because issues may crop up long after your divorce.
Make sure that you pay off all debts you agreed to pay (and that your former spouse has, too) to avoid damaging your credit record.
Work hard to establish a positive credit history in your own name. Pay your bills on time, and talk to your creditors if you get into any financial trouble.
Help your children adjust to a new financial reality. Divorced parents often worry about not being able to provide the same opportunities to their children, or may overspend out of guilt. Instead, why not be a financial role model for your children? Living within your means is a valuable life lesson you can learn--and teach.