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Starting over financially after a divorce can be extremely difficult for some. When you had shared assets, such as a mortgage, it can be overwhelming to understand what steps you must take to ensure you’re financially stable following a divorce. Especially since it’s not something you prepare for.
It’s important to reclaim your financial independence. It can be difficult to maintain your own wellbeing when your financial foundation has been shifted. Following these tips may help you regain you financial stability.
It’s difficult to think about your finances following a divorce, which can stem a lot of emotional turmoil for many of us. But regardless, it’s important to get a handle on your finances. Shomari Hearn of the Palisades Financial Group in Fort Lauderdale, Florida, says, “The first step to getting a handle on your finances following a divorce should be to evaluate your living expenses, any outstanding debt you may have, and your income, including any alimony or child support.” Laying out your financial responsibilities in relation to your income will help you establish a footing with where you stand financially and is a great place to start. You may recognize that some of your spending habits need to be reevaluated in your new financial situation, and having a grasp on that is important.
Monica Mizzi, of Legal Templates, explains how a financial plan should be set up following a divorce. Think of your short-term, mid-term, and long-term financial goals – and plan out what steps you need to take to get to each, “including gradual milestones to keep you motivated and on track.” It might be difficult to think of these goals following a divorce, but it is important. What do you need to do now in your life to keep financially stable? What financial goals would you like to meet within a few years? And what financial goals do you have planned for the future? Knowing the answer to these questions will help you make informed decisions on your spending and saving.
A financial planner can help you figure out what your next moves are going to be in life in order to establish financial independence. Especially if you’re new to managing your own finances. Sometimes, there’s one party in a marriage that took care of all the finances (paying bills, figuring out where to spend money, where to cut back on spending, etc.). A financial planner can help educate those who don’t have the strongest understanding of finances.
Sitting down and creating a new budget is a great tip following a divorce. New Jersey attorney Jef Henninger advises his clients to “use the divorce process as a reset button on their lives.”
“Since you are laying everything out there anyway, this is the best time to examine your spending and saving habits…seek professional advice if you need it but use this as an opportunity to start over and change your habits,” says Henninger. It makes plenty of sense. Your budget used to include another’s income and spending habits. Now that that other is no longer in the picture, your budget has to change.
If you’ve been left the home, it’s a good idea to remove your former spouse from the title of your home by refinancing and executing a quitclaim deed. It’s recommended by experts to consult with a mortgage company on your next steps.
It may be extremely important to do away with any joint accounts following a divorce to protect both parties. If you leave joint accounts open, a resentful ex-spouse may make purchases without your approval, which can put your credit at risk.
Most of the time, couples will place the name of their spouse as the primary beneficiary on insurance policies, retirement accounts, 401Ks, IRAs or life insurance policies. Now that your primary beneficiary is out of the picture, it’s best to choose a new one.
It’s important to keep documentation of your divorce decree for financial records, especially if you’d like to apply for a new home loan.
Divorce can be an extremely emotional transition for many, and for many it can create financial instability. We hope theses tips can help any struggling divorcees achieve their own financial stability.