When a divorce is looming in your life, many things are probably running through your head. One of the most important things you may be considering is your ability to manage finances as a single person.
If you are involved in a divorce, you'll undoubtedly undergo financial changes after the marriage ends. This increases the need for solid financial preparation. Yet, while making good financial plans can seem daunting, thinking things through carefully can not only put you on better footing after your marriage ends: it can also build your confidence and allow you to focus on other aspects of the divorce.
Building Your Own Credit Essential Step Toward Financial Independence
There are a few things that you should do to help facilitate your transition into single life. If you can afford it, consider meeting with a financial advisor. A financial advisor will assist you in the nuts-and-bolts process of reestablishing your own financial presence.
Whether you have the assistance of a financial advisor or not, you will need to untangle any financial accounts that you held with your spouse. It is especially important to separate credit accounts. Keeping joint credit obligations with a former spouse (like credit cards or a mortgage) is very risky. Even if your divorce agreement states that your ex is supposed to pay certain bills, if he or she fails to do so on any account that remains jointly held, your credit will be impacted.
Eventually, you will want to build up your own credit. You may find it helpful to request your credit report so you know where you're starting from; this also allows you to dispute any inaccuracies in your credit history. If your income is low or if your credit has taken a serious hit, consider getting a secured credit card. You will have to put money into an account up to the amount of your credit limit, but secured credit cards are available to those with "thin" credit or no credit in the past. Whether you use a secured credit card or some other credit-building tool, strive to maintain a low balance and pay your bills on time - not only is this a good budgeting practice, but it will prove to credit reporting agencies that you are responsible in managing your own credit.
Take a Meticulous Approach to Budgeting
Ultimately, your standard of living will probably change after a divorce. Considering the cost savings realized by sharing a household, two people usually cannot live the same way of life apart as they did together. However, a well thought-out budget can help you meet the financial changes associated with divorce.
Following your divorce, you should try to gain a general understanding of your assets. One way to do this is to examine your financial documents and records. For example, look at tax returns and monthly bills when setting up a realistic post-divorce budget. You should carefully consider all expenses you will now be responsible for; there are the basics like food, gas, a mortgage or rent, but also more easily overlooked costs like home upkeep, car, home and health insurance, utility bills and entertainment.
Remember, you'll also want to put aside some funds that you can turn to in the event of an emergency. Some financial experts recommend setting aside at least $2,000.
Start Out Strong by Getting a Favorable Divorce Settlement
Careful planning is one way to cushion the impact of divorce on your financial situation. However, it is also a matter of starting from the right place. An experienced family law attorney can help you obtain a divorce settlement that is favorable to you financially. This means fair terms when it comes to property division, spousal support/alimony, and, if applicable, child support.
There's no doubt that getting past your marriage and on to a successful single life can be a challenge. But, with the right planning and the right help, you can make the transition as painless as possible.