Danny Dotson
Getting a divorce is often one of the most challenging phases in the life of an adult. The reasons are mainly existential – people are often heartbroken, with dreams, plans, and routines shattered in pieces, while the fears of living alone or estranged children start creeping in.
As if all these emotions weren’t enough, financial fears arise.
Many don’t know how to untangle their finances safely, nor are they sure they will have enough resources to maintain their lifestyle and have the future and retirement they hoped for.
In such a crisis, financial planning is of essential importance, as you can hardly close your eyes and wait for the issues to sort themselves out.
You need to reexamine the facts, reconsider your financial future, and make some smart decisions. These valuable action tips will help you navigate the muddy waters of post-divorce finances.
Gather All the Financial Data
The first step is gathering as accurate and comprehensive information on your finances, estate, and assets as possible.
This will enable the assessment and in-depth analysis of your finances as the basis for your post-divorce financial planning strategy, this is how a great financial advisor like Opes FP would help..
If you’re not sure certain information or the documents you have are important, discuss them with the professional, and let them make the call.
Set Your Financial Goals
A good financial plan is one led by your financial goals. Even if you are struggling, think about what you want to achieve in the future – repaying debts, an early retirement, buying a house, or saving for your children’s college fund.
These goals will motivate you to go through the whole planning process, and they will be your guiding light as you work to make them a reality.
Get a Control of Your Budget
Try to get a sense of your monthly cash flow – keep a close eye on your income and outcome.
You need accurate insight into where exactly your money goes so that you can get control over your budget and develop your medium and long-term plan.
One of the good ways to create your budget is by following the 50/30/20 budget principles.
According to it, you should set aside 50% of your income towards needs, such as housing, transportation, utilities, etc.
Another 30% you will use on your wants – clothing, entertainment, and dining out.
What’s left, 20%, will go towards debt-repayment and savings so that you can fulfill your medium and long-term goals.
Create an Emergency Reserve
With or without children, being single, you need a cash safety net.
Go for setting cash aside in a bank enough for six months.
Since the interest rates are so low, alternatively, you can think about putting the money in a short-term bond fund and getting a 2% to 3% yield on your funds.
Create an Income Safety Net
After a divorce, both women and men feel financially vulnerable.
They fear having no one to turn to in a crisis.
For peace of mind, you could think about getting a disability insurance policy on yourself.
This kind of insurance will provide you with a monthly” paycheck” if you get injured, ill, and cannot work and work.
Rethink Your Investments
If you and your ex-spouse had some investments, you might also own assets you know nothing about or are not suitable for you. You should analyze each of these investments to see if they are reasonable and check whether they fit your risk tolerance and goals.
If you’re not familiar with these matters, an independent investment advisor could help you find investment models more appropriate for you and examine the tax consequences.
Open New Accounts and Change Beneficiaries
After the divorce, make sure you’ve canceled your joint accounts and opened new bank and investment accounts. If you do not have an emergency cash reserve, get a credit card so that you can go through some financial troubles if they occur.
It is also crucial to change the beneficiaries on your accounts after a divorce.
This is an easy process, and you can usually do it with a simple form.
Consult your attorney, who you should list as primary and contingent beneficiaries on your accounts if you have a new living trust.
By following the steps above and consulting the professionals in any area you find challenging to manage, you can take control over your finances after the divorce and make the most out of them.
