Managing Your Finances After A Divorce

January 17, 2022

Managing Your Finances After A Divorce

In most marriages, one spouse handles financial matters. Thus, after a separation, the spouse not active with the financial matters during the marriage often struggles with handling their financial situation on their own. Seeking financial counseling can help you limit the risks that come with a divorce.

At Brighter Day℠ Law, you’ll be our priority. Our team of experienced and dedicated family law attorneys in Colorado will make you feel supported and well taken care of. Here are some critical financial ideas you should follow after a divorce.

Why Do You Need Help Managing Your Finances After A Divorce?

Managing your finances after a divorce is a pervasive fear, which is completely justified. After a divorce, it’s easy to get overwhelmed by the details and lose sight of the financial picture. You must remain focused on how your finances will look post-divorce. Start by knowing how much you have, WHAT you have, and WHERE you have it. As divorce financial planners, we’ll help you understand how your finances will look like post-divorce.

For instance, $250,000 equity in your house differs from $250,000 of cash in the bank or $250,000 worth of stock in your ex-spouse’s business. Don’t be afraid to know what your assets are.

How to Manage Your Finances After A Divorce?

After a divorce, you’re responsible for making decisions regarding your personal finances. As difficult as it may seem, now you have to think in terms of your future, not the past for your financial plan. While every person’s situation will be unique, here are basic personal finance tips that apply to everyone no matter their financial situation:

  • Check your credit. The first you should do when going through a divorce is to request a credit report from the major credit reporting agencies. Getting a credit report and knowing your credit score may seem like a challenging task, but in the long run, it will help you. It’ll help how much you need to need to do to recover. Cutting financial ties with your spouse can affect your credit score significantly, but fortunately, building your credit score is fairly easy. One way to build your credit is by paying off any outstanding debts owed. Another way is to make sure you pay your bills early. You must maintain your credit score above 700, this allows you to get loans and credit cards without paying high-interest rates.
  • Create a budget. A budget plays a crucial role in managing your finances post-divorce. Having a budget, even a short one, helps you track your income and expenses. To understand your income needs better, start collecting all of your statements for utilities, rent/mortgage, and all other regular expenses. Understanding where your money is coming from and where it’s going can help you eliminate unnecessary expenses. Also, having a budget offers the structure you need to start saving for your future financial needs.
  • Live within your means. One of the biggest challenges that newly divorced women face is adjusting to a different lifestyle and reducing their standard of living. Moving from a two-income household where you could depend on your husband’s income to cover bills to a single income where you cover everything can make anyone’s head spin. After a divorce, you must learn to live on less money. This means you must re-examine your spending habits. Everyone, not just divorcees, can benefit from learning how to live within their means, which means spending less money than you make. People who don’t learn this lesson often struggle financially, and they may never reach their financial goals.
  • Start reducing your debt and increasing your savings. To build your financial security, you must start eliminating your debts and building your savings. Pay off any debt that you may already have while avoiding incurring more debt. The best way to avoid going into debt is to have a fat savings account. Having an emergency fund can help you pay off unexpected expenses. Also, allocate a percentage of your income to invest in your future.
  • Note what you have. During divorce proceedings, it’s common for account statements to start disappearing. So, if you’re contemplating divorce, start by listing down all your assets and collecting statements for all your financial holdings. During your divorce settlement negotiation, this step is helpful as a starting point. Here’s an example of items you can list on an Asset Worksheet. Also, don’t forget to note the value of each asset, and who owns what portion of it:
    • Retirement assets
    • Liquid assets
    • Personal property
    • Real estate
    • Business interests
    • Cash value life insurance
  • Seek and accept help. Don’t allow your new status as a divorcee to be a cause of embarrassment or shame. The fact is, there are many people in your situation, which has led to the creation of government or community programs, which help people facing similar circumstances. You may qualify for free or reduced health care coverage and help with buying food and other necessities for your family. Also, you may be eligible for tax breaks, such as earned income tax credit (EITC) because of your post-divorce financial status.

How to Deal With Life Insurance After A Divorce

Your life insurance during the marriage is connected to your spouse in one way or another. Your ex-spouse is probably listed as your beneficiary, such that if you die, they get the payout to take care of themselves and your children. After a divorce, talk with a financial advisor about your specific situation.

After separation, take the following steps:

  • If you have no children and have no financial obligations to your spouse, all you need to do is change the beneficiary of your policy when filing for divorce.
  • If you have children, it makes sense to keep your ex-spouse as your beneficiary because your children can’t receive the benefits until they turn 18. Alternatively, you can appoint a trustee to manage the finances of the account until your children turn 18, but it’s best to leave your former spouse as the beneficiary for the children’s sake.

Can’t Afford to File for Divorce?

If you can’t afford to hire a divorce lawyer, you can represent yourself and file for a divorce yourself. You can access the divorce forms through the state’s court websites or at the court clerk’s office. The forms should include a form to have the divorce fees waived because of financial circumstances. You must fill out documents regarding your financial situation and then ask the court to waive the fees. Also, you can ask the court that your spouse be required to pay your divorce fees.

How Long Does It Take to Recover From a Divorce Financially?

It might take up to five years for you to regain your former financial equilibrium. A recent survey shows that most individuals took five years to recover financially and psychologically following a divorce. A higher number of respondents said the emotional aspects of a divorce caused them more stress than their finances. However, when the divorce was final, the respondents stated that their finances caused them more immediate stress. 35% of respondents stated they had not recovered financially five years after their divorce.

A clear understanding of the resources a standard of living may require can help you plan for a new lifestyle. While some people maintain a budget that resembles their spending patterns during their marriage, others struggle to sustain their living standards.

Will I Ever Recover Financially From Divorce?

Financial recovery after divorce isn’t a simple task, but it’s achievable, depending on your situation. One thing that doesn’t help is waiting. Procrastination will get you nowhere and may even set you back further.

By keeping in mind your financial goals and following plans and strategies that include an investing program based on income and goal achievement, you can move closer to your goal to recover a level of financial independence you had before your divorce. As difficult as it might be, saving is crucial. By saving a little money here and there, you’re regaining control of your financial future and you’re investing in your future.

Why Do You Need To Work With a Divorce Attorney for Managing Your Finances After a Divorce?

Before hiring a divorce attorney in El Paso County, you must do your homework; you can get personal recommendations from trusted friends or a business associate. During divorce proceedings, your team should include a divorce lawyer and a Certified Divorce Financial Analyst® (CDFA®) at a minimum. Other members of the team could include an accountant, a mediator, a business or pension evaluator, or perhaps a child or individual therapist.

While you may think the more professionals you hire, the more costly your divorce will be, that’s not true. In the long run, having the right help will reduce litigation costs, and it will save you from making expensive mistakes regarding your divorce settlement.

Know when to seek help. Every person’s financial situation is unique, and so is everyone’s divorce. However, we all need to anticipate our financial futures after major life changes. Whether your divorce is adversarial or amicable, a professional divorce attorney can help you separate your personal life and finances. Don’t be afraid to use the available resources to rebuild your financial life. A divorce can cause major financial setbacks, and it may take time to get back on your feet.

Contact a Colorado Divorce Attorney Today!

Working with an attorney isn’t an act of aggression. At Brighter Day℠ Law, we can help you manage your finances after divorce. We will guide you through the rules that will affect your assets, debts, property, and more. Also, we can direct you to experts who can offer detailed guidance for your specific needs. Don’t leave your post-divorce finances to fate. Contact us today at 719-733-9129 or chat with us online to schedule your consultation with a dedicated divorce lawyer.

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