The divorce papers are signed, assets divided and now you finally feel ready to move on to the next phase of your life.
This is usually a good time to do a check-in around your finances and if needed, make any adjustments. Why might this be a good idea?
Statistics overwhelmingly show that a woman's standard of living goes down after divorce and it is usually harder for them to recover financially.
As Maria Bartiromo, a recognized financial journalist, bluntly stated, “Most women outlive their spouses. Divorce remains at record rates. It's important for a woman to be able to control her finances.”
So where should you start before gaining financial independence? Moving on financially after divorce doesn’t have to be confusing if you have a plan in place:
1. Set up a reserve account: Most of us wouldn’t go out on a tightrope or swing on a trapeze without a safety net. This same idea rings true for your finances. Out on your own, having money set aside for little and big emergencies can be a way to prevent that 'uh-oh' moment if unexpected expenses come up. A good rule of thumb is to have 3-6 months of expenses available in your savings account and easily accessible. The reserve can also help protect you against unforeseen issues like needing to get your car fixed or your water heater breaking down, etc. You can also have multiple reserve accounts for different purposes: emergency, family trips, back to school shopping, holidays, etc.
2. Automation is your new bestie: One of the worst feelings is accidentally making a late payment; although most companies will give you a pass the first time, they often aren’t as forgiving the second or third time around. Setting up automatic payments in advance can help prevent those missed due dates. Even though you have your system in place, it still makes sense to review your bills once a month just to make sure charges are correct and your payment did get applied. Funding your savings account or retirement plan can also be set on autopilot, making your saving that much easier.
3. Be true to your finances: Living outside of your financial comfort level can quickly put you in a financial danger zone. Budgeting is hard and most of us don’t like it one bit. If you find yourself dragging your feet, try working with a knowledgeable financial advisor to help you commit to getting this task done. Why is this so important? Knowing what your cash flow looks like and how much discretionary income you have, you then are able to plan ahead and have a better understanding of when you can and cannot spend. If you are a single mom, be honest with your financial limitations. You don’t have to give your children every detail, but having them understand why and how you budget will take you far. It can be really hard as a mom not being able to give your children everything, but in the long run, you might avoid overwhelming yourself with debt and worry.
4. Empower your money and yourself: In other words, find ways to make your money and skill set work for you. If you have access to a retirement plan at work, ask questions and learn how the plan can benefit you. Ask lots of questions, and if the answers aren’t clear, ask again. If you don’t have a retirement plan, seek out advice from a financial advisor on setting up your own Individual Retirement Account (IRA). If you have been out of the job market for a while, find ways to brush up on your skills either through volunteer work or through continuing education; don’t sell yourself short with any new position you take on. Research and negotiate the best salary you possibly can. You can always negotiate down, but it is much harder to negotiate up.
Navigating the financial world of budgeting, investing and financial planning after divorce doesn’t have to be done in one fell swoop. Take baby steps and tackle tasks one at a time. There are many advisors out there who specialize in working with women and those who have been through divorce, and many offer educational opportunities as well. Having a plan executed over time is better than having no plan at all.
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