Keeping Your Personal Finances in Mind When Going Through a Divorce
This post does not necessarily reflect the opinions of Jason Levoy.
When going through a divorce, you have to keep track of many moving parts. Hiring an attorney, deciding on child custody, isolating your personal finances, reevaluating family expenses, etc., can all be extremely daunting.
Divorce can be overwhelming, but don’t let your finances take a backseat to other issues. Your future self will thank you for staying on top of them now. This guide will help you navigate through your divorce all while keeping your finances at the forefront of your mind.
Determine a Post-Divorce Budget
With divorce will come the loss of your spouse’s income contribution to the household. Or, perhaps your spouse was in charge of finances while you were together. This can be a difficult situation because you may not know where to start when rebuilding or maintaining your finances. If your spouse’s income was significantly higher than yours, chances are your spending habits and expenses will change post-divorce.
Creating a budget is a good place to start. It will help you understand your current financial situation and prevent you from being unprepared for unexpected expenses. Creating a budget doesn’t have to be time-consuming or complicated; you just have to be consistent with your efforts to develop healthier money habits. Another tip to keep in mind is to not listen to unsolicited advice. Just like you shouldn’t listen to your friend’s divorce advice, you should also not always follow their financial advice.
Try purchasing a budget planning notebook or download a finance tracking app to keep all of your income, expenses, and financial goals in one place. Start with listing your income and expenses. Your income should include your salary, alimony, and child support. Examples of expenses include paying off credit card balances, mortgage payment, groceries, utilities, and transportation. Laying out your flow of income and expenses will help you be able to identify where you can cut unnecessary spending.
Take Control Of Your Credit
The first step in monitoring your credit is making sure you’re cutting back on excessive or unnecessary spending and prioritizing bills. To keep your credit score high, avoid having any missed payments; this includes paying your monthly utility and store credit card bills on time every month. If you have bad credit, now is the time to rebuild your credit score.
Rebuilding your credit isn’t too hard, but it may take some time, so consistency is key here. Some things that will help increase your score include limiting how often you apply for cards or new accounts, catching up on overdue payments, and reducing credit card statement balance and utilization. Take some time to educate yourself on credit and where you stand to help develop different strategies to help pay off your debt quickly and easily.
Close Existing Joint Accounts
If you and your soon-to-be former spouse share a joint savings account or checking account, you’ll want to close those as soon as possible. This will be an easier process if you are still on speaking terms with your ex. If you’re not on good terms, don’t worry, there’s still a way to close the account.
Among other crucial questions you should ask your divorce lawyer, consider also speaking to them about the process and legalities of withdrawing from and/or closing your joint account without your spouse. You can also consult an independent financial advisor or contact the bank your joint account is with directly for advice. Either way, be sure to change direct deposits and auto-pays associated with the account before closing it to avoid further complications.
Figure Out What To Do With The House
If you and your spouse have joint ownership of your home, consider multiple options when deciding what happens to the house. You could team up to sell the house and split the profits, refinance the house, buy out the house from your spouse or vice versa, or even keep joint ownership of it.
You should also consider the option of buying a home yourself, especially if you need to sell or move out of your current home. This could be a great fresh start, but you need to make sure your finances are up to par, like making sure you have a good credit score to buy a house. Whatever route you take, make sure to factor in your new budget, state laws and taxes before making a final decision.
Going through a divorce is hard enough, your personal finances shouldn’t have to suffer as well. Make sure you're developing and prioritizing your budget, as well as living within your means to help you build up your financial independence again.
If you're looking for more free divorce resources, subscribe to The Divorce Resource Guy Podcast.