There’s no doubt about it, going through a divorce can be an emotionally trying time. Ironing out a divorce settlement, attending various court hearings and dealing with competing attorneys can weigh heavily on the parties involved. In addition to the emotional impact a divorce can have, it’s important to be aware of how your financial position will be impacted and understand how to navigate finances after divorce. Now, more than ever, you need to make sure that your finances are on the right track. You will then be able to put the past behind you and set in place the building blocks that can be the foundation for your new financial future.

Assess your new financial situation.

Following a divorce, you’ll need to get a handle on your finances and assess your current financial situation, taking into account the loss of your former spouse’s income, if applicable. In addition, you may now be responsible for paying for expenses that you were once able to share, such as housing, utilities and car loans. Ultimately, you may come to the realization that you’re no longer able to live the lifestyle you were accustomed to before your divorce.

Adapt your budget.

Establish a budget that reflects your current monthly income and expenses. In addition to your regular salary and wages, be sure to include other types of income, such as dividends and interest. If you will be receiving alimony and/or child support, you’ll want to include those payments as well.

Divide expenses into two categories: fixed and discretionary. Fixed expenses include things like housing, food and transportation. Discretionary expenses include things like entertainment and vacations. You may need to cut back on some of your discretionary expenses as you adjust to a new income. But it’s important to keep enjoyment in your life, so build some occasional fun into your budget that allows you to explore your new life circumstances, enjoy a new hobby, meet new friends or embark on a new adventure.

Reevaluate your financial goals.

While you were married, you may have set certain financial goals with your spouse. Now that you are on your own, these goals may have changed. Start out by making a list of the things that you now would like to achieve. Do you need to put more money towards retirement? Are you interested in going back to school? Would you like to save for a new home? After your divorce, you may find new goals that weren’t on your radar before become more important.

Take control of your debt.

While you’re adjusting to your new budget, be sure that you take control of your debt and credit. You should try to avoid the temptation to rely on credit cards to provide extras. If you do have debt, put a plan in place to pay it off as quickly as possible. To pay off your debt strategically:

• Keep track of balances and interest rates.
• Develop a plan to manage payments and avoid late fees.
• Pay off high-interest debt first.
• Take advantage of debt consolidation or refinancing options.

Monitor and improve your credit score.

Divorce may have a negative impact on your credit rating, so consider taking steps to try to protect your credit record and/or establish credit in your own name. A positive credit history is important since it will allow you to obtain credit at a lower interest rate when you need it.

Review your credit report and check it for any inaccuracies. Are there joint accounts that have been closed or refinanced? Are there any names on the report that need to be changed? Visit annualcreditreport.com for more information about getting your free credit report.

Review your insurance needs.

Typically, insurance coverage for one or both spouses is negotiated as part of a divorce settlement. However, you may have additional insurance needs that go beyond that which you were able to obtain through your divorce settlement. When it comes to health insurance, make having adequate coverage a priority and explore your coverage options.

Now that you’re on your own, you’ll also want to make sure that your disability and life insurance coverage matches your current needs, especially if you are reentering the workforce or if you’re the custodial parent of your children. Finally, make sure that your property insurance coverage is updated. Any applicable property insurance policies may need to be modified or rewritten in order to reflect any property ownership changes resulting from your divorce.

Change your beneficiaries and update your will.

After a divorce, you’ll want to change the beneficiary designations on any life insurance policies, retirement accounts and bank or credit union accounts you may have in place. Keep in mind that a divorce settlement may require you to keep a former spouse as a beneficiary on a policy, in which case you cannot change the beneficiary designation.

This is also a good time to make a will or update your existing one to reflect your new status. Ensure that your former spouse isn’t still named as a personal representative, successor trustee, beneficiary or holder of a power of attorney in any of your estate planning documents, unless you want them to retain legal status in your affairs.

Consult a financial professional.

Although it can potentially be done on your own, you may want to consider consulting a financial professional to assist you in adjusting to your new finances after divorce. A financial professional can work with you to develop a plan designed to help you address your new financial goals, make recommendations about specific products and services, and monitor and adjust your plan as needed.

Grow has contracted with CUSO Financial Services, L.P. (CFS) to provide investment services, and your CFS Financial Advisor will help you build a plan that meets your needs. The advisor will look at your current spending, saving and investing, learn about your goals and priorities, make objective recommendations and support your efforts moving forward through the implementation and management of your plan.

Schedule a Complimentary Consultation

Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members. For specific tax advice, please consult a qualified tax professional.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2020.

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Posted In:

• Family Planning
• Investment Education