The financial consequences of a divorce can be difficult to handle, especially for women who are by nature less tolerant to financial risks.
Divorce can be a difficult time for any woman. The emotional, psychological and financial aspects of getting a divorce are tremendous. It’s only in the movies where a handsome, rich man comes into to the picture and gives a divorced woman everything she could ever need.
In reality, you may be forced to go back to work or work longer than expected and deal with all your financial burdens alone.
The financial consequence of divorce can hit a woman more than a man.
According to a study by the University of Missouri College of Health and Environmental Sciences, women tend to struggle more with making financial decisions than men. Risk tolerance, according to the researchers, is a major factor that contributes to wealth accumulation and retirement.
Financial Planning for Women After Divorce
After the divorce, a woman has many things to deal with. One is her finances. Having too much on your plate can be overwhelming. Here are some important steps to make:
Calculate your living expenses.
It’s hard to think about ways to financially get back on track without knowing how much you actually need. So, the first important step is to assess your income needs, as well as your assets. Create a budget. It gives you a realistic picture of how much you need to make. It also helps you with your settlement negotiations.
Identify your assets and liabilities.
Write down everything you own as well as everything you owe, from your cash advances to credit card bills and loans. Most liabilities and assets obtained during marriage are community property and community debt. Thus, both you and your former spouse are equally responsible.
Learn about tax consequences.
A couple getting a divorce may not fully understand it’s tax consequences. It is helpful to consider getting advice from a tax professional or attorney. Couples who have no children will have to change their income tax return once the divorce is final. If they have kids, tax issues can be more complicated since custody and child support orders may have an impact on each other’s tax circumstances. Both spouses can be held jointly and individually responsible for any tax, interest or penalty owed.
Understand the time value of money.
There are different modes of payment involved after a divorce. They include alimony and property buyouts. In either case, it is important to understand that the value of money changes over time. Thus, the current and future value, as well as the effects of inflation are among the major things to consider.
Once you have figured out your living expenses, the next important step is to generate income. List down your options. Are you going back to work or will you find a better-paying job? Will you start a business? Don’t forget to evaluate your assets for potential passive income. For example, if you have dividends, another property which you can rent out, shares in a business you’re not directly involved with, etc.
Make the necessary insurance changes.
Insurance may become even more important post-divorce. Under a divorce agreement, it may be required to name an ex-spouse as a beneficiary. If a former spouse dies, his insurance payout may be passed to the surviving ex-spouse as a replacement for paying child support or alimony. Health insurance is crucial as well. Once the divorce is final, you can no longer stay as a dependent on your ex-spouse work health plan. Furthermore, let your home insurance company know if one of you has to move out. The policy should be in the name of the homeowner.
Talk to a divorce financial expert.
Often, a divorce can cause a woman to think emotionally than logically. Talk to a certified financial analyst specializing in divorce. He or she can help you clarify your goals, deal with your current financial challenges, and offer you peace of mind.
The financial consequences of a divorce can be difficult to handle, especially for women who are by nature less tolerant to financial risks. It is important to examine your financial life to determine where to start. Remember, preparation and financial planning are the keys during and after a divorce. It can help protect your financial interests, your children’s future, and your well-being.