Navigating your financial situation isn’t a walk in the park, and it becomes significantly harder when you’re going through a divorce. Divorce not only changes your life but also greatly impacts your finances, necessitating urgency in restructuring your financial equilibrium post-divorce. Here are eight key tips to guide you towards reclaiming your financial independence.
Divorce isn’t just emotionally overwhelming but financially burdensome as well. As per a Nolo report, the average divorce costs roughly $12,900 in the U.S, which includes $11,300 for attorney fees and another $1,600 for additional expenses like court fees, child custody evaluators, tax advisors, real estate appraisers, etc. The ensuing financial challenge is certainly a tough nut to crack.
As you go about this painful process, keeping a lucid head for managing your finances is vital. The following tips could provide a useful template. Having a well-crafted plan and procuring professional advice can pave the way to financial independence. Uncertain about dealing with post-divorce financial hurdles? This guide will provide critical steps for you to follow.
1. TERMINATE ALL SHARED ACCOUNTS
Once a divorce proceeding begins, promptly closing all joint accounts is a must to avoid potential liabilities that could negatively impact your future finances. In case the accounts carry an outstanding balance which can’t be cleared, freeze the accounts to prevent future expenses. Make sure you inform your joint creditors in writing about the divorce, safeguarding them from misuse by your ex-partner.
2. ESTABLISH NEW ACCOUNTS
Depending upon your circumstances, you might find yourself short of cash for regular expenses after a divorce. In such a case, procuring new credit cards before terminating joint accounts might be helpful, especially if your credit score isn’t stellar and there’s no emergency cash reserve. Start new bank and investment accounts and replace the ones that you held during your marriage as soon as possible.
3. MODIFY YOUR BENEFICIARIES
It’s of utmost importance to update the beneficiaries of your accounts after a divorce; neglecting this might benefit your ex-spouse unexpectedly through your IRA, 401(k), etc. Modifying beneficiary designations is a straightforward process, mostly requiring a simple form. Consult your estate lawyer about who should serve as the primary and contingent beneficiaries.
4. REVISE YOUR INSURANCES & ESTATE PLANNING
In the aftermath of your divorce, reconsider your estate planning. Consult your attorney about updating your will and power of attorney to safeguard your interests and ensure your chosen beneficiaries inherit your estate. Also, update your insurance policies such as car, home, and liability coverages.
5. VERIFY YOUR CREDIT SCORE
Monitor your credit score at all three major credit bureaus during and after the divorce. Rectify any mistakes or issues on your credit report immediately, as they might affect your credit rating, loan costs, insurance premiums, job acquisition prospects, or renting an apartment.
6. FORMULATE A BUDGET
Transitioning from dual to single income is a monumental shift. Adhering to a budget post-divorce is critical. Map out your income streams and new expenditures to understand savings and investment potential and discretionary spending limits, facilitating a smooth transition to your new financial reality.
7. Modify Wills and Medical Power of Attorney
It’s highly possible that your ex-spouse served as the power of attorney and beneficiary to your will. Reconsolidate these designations to reflect your current wishes and appoint new persons as necessary.
8. START TAKING CHARGE OF YOUR FINANCES
In many marriages, one spouse assumes the role of financial conductor involving tasks like bill payment, budget planning, balancing checkbooks, filing tax returns, etc. If you weren’t that spouse, considering partnering with experts such as certified financial planners, bankers, and professional tax preparers could be beneficial to your financial understanding.
In conclusion, dealing with a divorce can be challenging, but taking slow, calculated steps can help both your emotions and finances adjust to this significant life change. It’s imperative to remain composed and logically consider each financial decision. Recovering your financial health and moving forward wisely is critical to securing your financial future.
