What separates the haves from the have-nots? Why do some women struggle financially for decades after their divorce, while others go on to recover and thrive?
What makes the difference is not necessarily what you think.
Climbing out of the financial hole that divorce drives you into does not require you to spend the next ten years counting every penny, and living on rice and beans.
Nor does it require you to re-marry someone as rich as Donald Trump.
What financial recovery does require is habits: good, solid, sustainable financial habits.
Here are 10 habits that financially smart divorced women have that the rest of us would do well to adopt, too.
1. They Set Financial Goals. You don’t have to have a lot of money to set financial goals. As a matter of fact, you don’t have to have any money at all. You just need to want to have money and decide where you want to be financially in five, ten or twenty years. Do you want to be able to buy a new house? Do you want to help put your kids through college? Do you want to be able to retire before you turn 102? All of these are (or could be) financial goals. Financially smart divorced women not only make financial goals, but they also spend time working to achieve them.
2. They Check Their Credit Reports Regularly. Just like brushing your teeth for a full two minutes twice a day, checking your credit report usually falls into the category of things that you know you should do, but, for whatever reason, just don’t do. When you are newly divorced, you need to make sure that the financial ties between you and your spouse really do get broken, and that your credit is not suffering because of his debts. Watching your credit report is the easiest way to do this.
3. They Follow-Up On Their Divorce Retirement Benefits. Lots of people don’t realize this, but it takes more than a divorce judgment to transfer retirement benefits from your spouse to you. Most of the time it takes a special court order called a Qualified Domestic Relations Order to make the transfer actually happen. If you didn’t get that order entered at the time of your divorce, you must make sure that it gets entered as soon as possible after you’re divorced. Otherwise, you won’t ever receive the benefits you were supposed to get.
4. They Make A Budget. Making a budget sounds worse than it is. The truth is that, if you have just been through a divorce, you probably already made a budget. Most courts require divorcing individuals to prepare detailed financial affidavits to present to the court. If you completed one of those types of affidavits, you have already put together a list of your income and expenses. That is your budget. You may have to tweak it a little bit, but most of your work is already done.
5. They Live Within Their Means. Once you make a budget, you have to live within it. Very likely, that will mean saying “no” to a lot of things you used to say “yes” to – including your kids! If you look at that reality with anger and despair, you will suffer. If, however, you take your new financial reality as a challenge, set financial goals for yourself, and live within your means, you soon find yourself once again moving up the financial ladder, instead of staying stuck on the bottom.
6. They Manage Their Taxes BEFORE They Are Due. Any money you receive as alimony, maintenance, and spousal support is taxable income to you. But no income taxes are withheld from the monthly payments you receive. So, instead of paying your taxes as you go along (like you would from a normal payroll check) you have to pay all of the taxes on your alimony income at one time, in April, when you file your income tax return. If you have been financially smart and saved a percentage of each alimony payment, you will have no problem paying your taxes. If not, tax time will not be a good time for you!
7. They Understand Their Personal Finances. You do not have to be a CPA or a financial planner to understand your personal finances. You just need to know a few simple things: What do you own? What is it worth? What do you owe? How much and to whom? That’s it. Write that information down and you have your own, personal balance sheet. From there, you can start planning your financial future from a place of knowledge and strength.
8. They Do A Cost/Benefit Analysis Before Taking Their Ex Back To Court. Going to court is expensive. It also comes with no guarantees. You can spend a lot of time and money fighting in court and end up no better off than you were when you started. To keep the court system from sucking your finances dry, the best plan is to try to work out as much as you can with your ex outside of court. Only go back when you have no choice. Also, before you file anything in court, make sure that you have taken a good, hard look at the maximum amount you can possibly get by going to court, and the maximum amount you will have to pay to do that. Unless you stand to gain much more than you stand to lose, going back to court may not be worth the effort.
9. They Contribute To Their Retirement Even When They Think They Can’t. When you barely have enough money to pay your basic bills, saving money is the furthest thing from your mind. No matter. If you can even put $5 a week in your retirement account, that will be a start. While contributing such a small amount may seem pointless, interest compounds. That means that even small contributions can result in big gains over time. What’s more, making any contribution gets you into the habit of being a saver. That is a financially smart move no matter what your current financial situation may be.
10. They Are Generous. This seems so counter-intuitive. Why would you give money to charity or share what you have when you have so little? The simple truth is that you get what you give. Now, I’m not suggesting that you become reckless and give away mountains of money that you don’t have. But, what you can do is share. If you don’t have any money to share, share your time. Share your energy. Share. Will doing that guarantee that someday you will be a millionaire? No. But it will make you feel better right now.
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