Although it may not seem like it now, divorce is an opportunity to take control of your finances and achieve financial independence as quickly as possible. The sooner you put your money house in order after divorce, the sooner you can start afresh with a clean financial slate. Here are some strategies on what to do after divorce financially so that you can thrive even in this difficult time in your life.
Decide what you want from the divorce
Even if you’re not happy about getting divorced, it’s a positive step forward. After all, staying in an unhappy marriage is unhealthy and unbeneficial for both partners. You don’t want to continue feeling trapped and resentful toward your partner forever. Even though divorce is not the ideal outcome, it opens the door to a fresh start.
Decide what you want from divorce before you start the process. What is your ideal outcome? What do you want your new life to look like? What are your priorities? Why do you want a divorce? What do you hope to gain from it? What do you want your life to look like afterwards?
Evaluate your current financial situation
Take a good look at your financial situation. The last thing you want to do is bury your head in the sand and pretend everything is fine. Is your marriage in financial trouble? Do you have any savings? How much debt do you have? What are your earning prospects? How much does your monthly income cover your monthly expenses? What are your long-term financial strategies?
Moreover, one of the most important things to do after a divorce is to check whether you are, or will be, financially healthy. To do this, you have to face all of your financial mishaps and difficulties. If you have a lot of debts, you have to tackle them head-on and focus on getting back on good financial footing. If you’ve analyzed your financial situation and find that you’re struggling to make ends meet, contact a licensed insolvency trustee as soon as you can.
Check your credit report and score
Your credit report and score have direct implications on your ability to get approved for loans, mortgages, and even jobs. This makes it crucial to check it before your divorce and divorce proceedings start. The divorce process can be time-consuming, draining, and stressful. Having a clean credit report will make it easier to secure new loans, mortgages, and other types of credit.
Your ex-spouse’s credit report will impact your credit score. Keep your eyes out for potential red flags like missed payments or a sudden drop in your score. If you were a stay-at-home parent and your partner was terrible at keeping up with payments, you might find yourself in a dire financial situation after the divorce. According to Borrowell, the average Canadian credit score stands at 672 — so aim to keep it at or above this number.
Diversify your portfolio and create an emergency fund
Diversification involves spreading all of your investments across different financial channels like stocks, bonds, and cash. It’s a way for you to limit losses in case a big event happens. If all of your investments are in stocks, should the market collapse, you could lose all of it. Divorce is a financial disaster waiting to happen. The best way to avoid this is to create a diversified investment portfolio and set up an emergency fund. What are your current investment strategies? Are you diversified?
On the other hand, an emergency fund is a way for you to protect yourself against unexpected expenses. Should something happen, you’ll have a financial cushion and won’t have to adjust your budget or empty your wallet. What is the state of your emergency fund? Do you have enough money to cover three to six months of living expenses? What are your post-divorce financial goals? How much do you want to earn? How much do you want to save? How can you achieve these goals? What steps can you take to reach your goals?
Create a budget
A budget is the foundation of every financial plan. It’s an easy way to track all of your expenses and set savings goals. You don’t have to wait until the divorce is final to create a budget. In fact, it’s a good idea to create one even before you get married.
To create a budget, start by tracking your monthly income. Note down where your money is coming from, such as a salary, freelance work, and investment income. Next, list all of your monthly expenses, such as rent, utilities, and car payments. You have to include all expenses — variable, fixed, and periodic. Finally, after seeing how much of your income is left after your expenses, create a savings plan.
If you don’t have much income left after your expenses, or if you’re falling deeper into debt, contact a Licensed Insolvency Trustee. A trustee will analyze your financial situation and direct you toward the best solution.
Divorce is a difficult and emotional process. It can be stressful and strenuous for both parties involved. For partners who are going through a divorce, it can be confusing financially, particularly if you and your spouse have not discussed your finances. After a divorce, you need to take control of your finances to ensure you can live your best life. By implementing these tips, you can do just that.