Divorce; it will impact your life in many ways. As you are trying to recover emotional stability, you’ll also have to help your children figure out theirs. And then there are finances to be dealt with. If there is one thing divorce shines a clear light on, it’s your financial situation.
Without question, divorce is financially stressful. Researchers estimate divorced women would need more than a 30% increase in income, on average, to maintain the same standard of living they had prior to their divorce. About one in five women fall into poverty as a result of divorce. Three out of four divorced mothers don’t receive full payment of child support. And, the financial burden on women after divorce is greatest during the first 12 months.
To navigate your way you first need to understand your financial reality: what you have, what you can expect to receive, and what your expenses are. Take stock of your checking and savings accounts, property, retirement accounts and any other money you have. Figure out how much money you expect to receive each month in earnings, spousal support and child support. Then calculate in as much detail as you can your fixed monthly expenses as well as other known and anticipated costs.
Now that you have your budget, how do you learn to live within your means? Here are some tips for getting your financial footing after divorce:
1. Review all your insurance policies. Make sure your ex is off of the health and auto policies, and that you are receiving the best rates you can on remaining insurance policies. Compare companies, deductibles and prices - you will be surprised at how much you can save.
2. Keep an emergency fund of money on hand. One of the scariest things following divorce is the unknown: when something unexpected happens, will you be able to handle it? Having an emergency fund will go a long way in giving you peace of mind for those unanticipated financial events. It doesn’t have to be thousands of dollars; if you are able to do nothing but stick $50 away in a jar in case your car battery dies or you need cash for a co-pay if one of the kids gets sick you will be ahead of the game.
3. Downsize your home. Leaving the marital home can be hard emotionally, but often it is a financial necessity. Mortgage payments, maintenance costs and utilities can drain your finances faster than you would imagine. Do you really need all of the room you had before? If you are renting an apartment, go smaller than you actually need. Children sharing a room the first year after divorce can save you as much as $1,800 dollars in rental payments yearly, and can actually create a great bond between your kids.
4. Learn to live with less and let go of any costly habits. Daily Starbucks runs, shopping trips with friends, cable subscriptions that give you 100+ channels, unlimited data plans on your cell phones: those are all great luxuries but, they are not necessities. If it isn’t something you absolutely need, you may have to learn to live without it until you get back on your feet financially.
5. Sell possessions that you no longer need. Selling things in your possession that you don’t need is a great way to pad your bank account. The first thing that should go? Your diamond engagement ring. Not only will it give you much needed cash, but it can serve as an emotional catharsis to moving past your marriage and into your new life.
6. Identify ways you can earn some extra money on the side. You may already have a full-time job and feel stretched to the max with work and parenting time, but there are ways to earn extra cash that won’t bite, too deeply, what little time you have. Start babysitting for friends and family. What is one more child to take care of, especially if you’re being compensated? Good at crafts? Make crafty items when the children are in bed and sell them on Etsy. Or, maybe you have a way with words and can share tips and expert advice through freelance writing work. There are endless possibilities when it comes to earning extra cash on the side.
The financial realities after divorce can seem overwhelming, especially if you relied on your ex to manage the money while you were married. Just keep reminding yourself of what is important to you and your children, and allow yourself the time to get your financial bearings. You will find that living within your means becomes second nature and even gives you the opportunity to take control of your money – and your life - on your own terms.
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