Getting divorced or separating from your partner is hard enough. The added stress of dealing with splitting finances is nearly unbearable. Your income changes, you have to divide assets and you could end up in a high amount of debt. You may find yourself in a completely different financial situation than you were while you were married. Continue reading to learn about overcoming divorce or separation in your finances.
Develop A New Budget
After divorce, you will most likely have more expenses to pay and less income to pay with. It is important to create a budget to fit your new financial situation. This will give you a good visual of where your money is going. Now you have a better understanding of what you can afford and how you can spend your money.
Plan To Pay Your Debts
You may be deep in the hole with legal bills and other expenses from your divorce. With your new budget, you can add in your debt payments to pay them down quickly. One approach is to refinance your high interest debt, i.e, credit card balances. You can take out a private loan or use home equity to pay off the high interest debt and manage your lower payments with a lower interest rate.
Rebuild Your Credit
Getting divorced can majorly affect your credit score. If your spouse had most accounts in their name, you may not have a very extensive credit history. You will need to build up your credit score for renting, buying a home, or applying for any credit cards or loans. One way to build your credit is by applying for a secured credit card. Be sure to pay off your entire balance, on time, every month and your credit score will begin to improve.
Change Your Tax Withholdings
Since your income has decreased and you will be filing single, not joint, your taxes will be extremely different. With a reduced income, you will be in a lower tax bracket. Adjust your withholdings with your employer based on your new tax bracket.
Set New Financial Goals
With your new financial situation come new financial goals. Your future looks different now than it did before your divorce. Look at your retirement savings to see if you need to increase your contributions in preparation for your golden years. Set up an emergency fund in the case of an unexpected event. Make a savings goal for a trip you have always wanted to take or something you have always wanted to purchase.
While your new financial situation may not be ideal, you can recover your finances after divorce, especially with the help of a financial advisor. Here at Wolfe Financial, we are ready to help you establish yourself in new financial situations. We want to see you thrive financially and have an exciting financial future.
Sources:
https://www.thebalance.com/how-to-deal-with-the-financial-impacts-of-divorce-1289261
https://www.divorcemag.com/articles/splitting-finances-during-separation-things-to-keep-in-mind