Getting divorced is often a costly process and divides all of your savings and assets. After your divorce your financial situation will have changed and you will need to work to rebuild it. It may seem tough but follow these simple steps and you will be back on track in no time.
Start Right Away
After your divorce you are likely exhausted and want to take a break from making tough decisions, but It is in your best interest to start planning out your new financial future right away. Ideally you have been keeping track of your finances throughout your divorce. In reality though, you may be unfamiliar with looking after your own finances or you may have been too caught up in other aspects of your divorce to pay it much attention. Regardless of the situation, it is important that you start reviewing your finances as soon as possible. Your income and your assets have changed drastically since finalizing your divorce. You need to take stock of your new financial situation and change your lifestyle accordingly.
You have gone from a two income household to one. You may still be receiving spousal or child support from your Ex, but your previous combined income is now paying for two households so your money won’t go as far as it used to. You may want to seek advice from a financial advisor or a divorce financial analyst to help get you get a realistic perspective of your finances.
You will need to re-evaluate your:
- Liquid assets
- Illiquid assets
- Recurring payments
- All forms of insurance (home, car, health)
- Credit score
- Tax obligations
- Tax breaks
Before you start making plans for the future you need to take stock of what you have and what you’re required to pay. After your divorce you will want to look at each of the things on this list, and any other financial information you have, to see the full scope of how your divorce has altered your financial situation.
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Once you’ve gained a full understanding of your financial situation, it is time to set your financial goals. You have to look at both what is practical, and what you value the most. Your main goals may be saving for retirement, paying off your mortgage, keeping your home, growing a travel fund, paying off your debts, paying for your children’s school, etc. The things that matter to you most should be clearly defined as your main financial goals. Make sure that when you’re setting these goals that you remember to continue to be realistic; you may want to hold onto your home, but find that there is no way your finances add up to do so and that the best thing for you would be to sell. As much as you need to be flexible about your goals, you also want to be make sure they are very specific. For example you don’t want to just save for retirement you want to save X amount by a certain date. This will allow you to build a solid plan and will encourage you to stick to it.
Build a Plan
Once you have your goals set you can begin figuring out how you will achieve them. You can go through this process on your own or with a financial advisor. First look at your income and factor out the necessary costs such as taxes and utilities. Then with your remaining income you can plan out how much you’ll put where from each pay check. This will be based on your goals and the hierarchy of value you have placed on them. If you have not already, you should ensure at this time that your goals are specific and have a designated goal date. The date does not need to be specific to the day but could be within 6 months, within 5 years, etc. Setting a time constraint will make deciding how to split up your paycheque much easier. By building a plan and sticking to it all of your financial goals can be reached.
By following these guidelines you will be able to make smart financial decisions that reflect your true financial situation and help you rebuild your finances after divorce.