Divorce is never easy, particularly when there are children involved. And in the midst of all the emotions, it’s often easy to overlook fiscal concerns. It’s important to consider, though, just how financially vulnerable you are following a divorce.
According to David Bakke, finance expert at Money Crashers, you should first and foremost ensure that you’re paying your bills on time. “Focus on the basics first. Pay your rent or mortgage first and then your necessary utilities like electricity, gas and water. Make sure you have enough money for food, and keep up with your car payment so you can still get around. Don’t ignore your income taxes, which can make for significant penalties and interest. After that, tackle your unsecured debts, such as credit card balances.”
Certified divorce financial analyst Danielle L Schultz of Haven Financial Solutions draws up a list of things to keep in mind while going through a divorce:
- Think Twice Before You Fight To Keep The House
A house is more like a use asset than an investment, meaning it costs you money to maintain, rather than generating income. It’s not easy to convert this to cash in an emergency, and depending on your work history you might not even be able to get a loan to remortgage it or take cash out in a homeowners line of credit. It’s very easy to be rich on paper with home ownership, but broke when it comes to paying living expenses.
- Get A Credit Card In Your Name
If possible, take out a credit card in your name only before proceeding with a divorce. You can still include your family income, which may get you a higher credit limit (or even get approved at all). Also, if you didn’t get credit cards in your own name before the divorce, the easiest ones to get are department stores and some discount chains. Use them sparingly and pay them off every month. Also, use a free service to know what your estimated score is (Credit Karma, Credit Sesame, Quizzle). The magic number is around 740—at that point you should get acceptances relatively easily and at the best rates.
- Use Your Attorney For Legal Matters Only
Your attorney should not become a shoulder to cry on. Get a therapist to discuss the psychological ramifications—they’re cheaper than an attorney by the hour.
- Invest In Yourself
Getting further education, certifications, and hiring a career counselor can dramatically increase your employability.
- Invest Any Settlement Wisely
Don’t get sucked in by someone who promises to take care of everything for you (they’re probably earning a big, fat commission and may not have your best interests at heart). Look for someone who is a fiduciary, who is legally obligated to keep your best interests foremost. Don’t invest in anything you don’t understand. On the other hand, don’t let money lie around in a bank savings account for years—while you won’t lose money, you are losing the opportunity to have that money grow.
“In addition to this,” says Tony Catinella, account executive at O’Neill and Associates, “you would do well to research discount and support for single parents. Insurance policies and certain rates may change now that you are a single parent. You may also need to reach out to friends and family members for help with childcare, especially if you need to work more than before.”
Divorce is tough on families both physically and emotionally. Furthermore, it can impact a family’s finances significantly. The best advice is to make this break-up as amicable as possible and get a plan in place quickly on how joint finances are going to be separated and settled.
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