Financial Planning and Divorce

Divorce can be one of the most challenging life events. It is an emotional time and can bring about significant changes. Among the many adjustments that follow divorce, achieving financial independence can be intimidating. However, with careful planning, customized strategies, and a positive mindset, it is possible to regain financial stability and independence post-divorce. Here are some starting points on the topic of financial planning for life after divorce.

1. Evaluate Your Current Financial Situation:

First, make a list of your assets and liabilities. Begin by taking a detailed inventory of your assets and liabilities. This will include bank accounts, retirement funds, real estate, vehicles, personal property, and debts like mortgages, loans, and credit cards. This is typically an easy first step because all of these items are disclosed during the divorce process. A review of your money is essential when financial planning for life after divorce. Knowing where you are starting from will help determine your next steps.

Next, list your income and expenses. Create a comprehensive budget that outlines your income and expenses.  You will commonly see advice stating you should look at a monthly budget. However, many of my clients have found it helpful and more manageable to measure on a weekly basis. Having all of the numbers detailed in front of you will help you identify areas where you can cut costs, find additional money to save, and create a system to pay all your bills on time. It’s also important to include all sources of income, such as alimony, child support, salary, or part-time work.

Then, evaluate whether you need to adjust your lifestyle. It is very important to spend less than you earn (you may have heard the phrase: live within your means). Because divorce is such a big transition, it may be necessary to adjust your lifestyle to fit your new financial reality. This might mean downsizing your home, finding more affordable transportation, or cutting back on non-essential expenses. If an adjustment like this is currently necessary, remember it’s unlikely to last forever. By spending less than you bring in, you can better protect your financial health, reduce stress, and work on building a strong foundation for your future self.

2. Increase Your Income

Consider career development opportunities. Maybe you can further your education or acquire new skills to enhance your career prospects. Look for opportunities to advance in your current job or explore new career paths that offer better pay, more flexibility, or other important benefits. When working through your financial planning for life after divorce, you might even realize that you want to move up your timeline for taking next steps in your job or other career changes.

Another option is to consider a side hustle. Side hustles or freelance opportunities can be a good option to supplement your income. The gig economy offers numerous ways to earn extra money, from ridesharing and delivery services to online tutoring and freelance writing. Just do your research to make sure the opportunity is legitimate and understand that freelance work does not come with tax withholding and certain other benefits that salaried positions offer.

3. Financial Planning for Life After Divorce Hinges on Goals

Short-Term Goals

Identify any immediate financial priorities. This might include setting up your emergency fund, paying off high-interest debt, covering essential living expenses, or changing beneficiaries on your financial accounts.

Long-Term Goals

Think about where you want to be financially in five and ten years as well as what you want retirement to look like. This can involve purchasing a home, saving for retirement, or investing in your education or career advancement.

4. Build a Support Network

Emotional health is closely tied to financial health. Surround yourself with supportive friends, family, or possibly a professional counselor who can help you manage the emotional aspects of your transition.

Additionally, you’ll want to find professionals who can help you navigate your post-divorce needs.

If you worked with a divorce attorney, ask if they specialize or work with other trustworthy attorneys that can help with your post-divorce needs. Ensuring that you have legal support to understand your rights and obligations regarding alimony, child support, and the division of assets is important during the divorce process. But, afterward, an attorney can help you create necessary legal documents, which might include a will, trust, and/or power of attorney. This ensures that your assets are distributed according to your wishes and that your financial affairs are managed on your terms.

Also, consider seeking advice from a financial advisor or a CERTIFIED FINANCIAL PLANNER™ who can help you create a realistic plan when it comes to financial planning for life after divorce. They can provide valuable information and help you with budgeting, investing, and planning for your unique goals. After a divorce, your finances may look drastically different, and your goals also may have changed. Working with a CFP^® professional can help by providing advice and a process to help you achieve your goals.

5. Financial Planning After Divorce Means Protecting Your Future

Insurance

Ensure you have adequate insurance coverage, including health, auto, life, and disability insurance. Sufficient insurance coverage can help protect your financial future by mitigating the risk of significant financial loss from unexpected events.

Savings and Investments

If you decide to work with a CFP^® professional, they will help you understand how much you should save and invest (and where those funds should be allocated). Depending on your specific goals, you may start or continue contributing to savings, investments, and retirement accounts. A CFP^® professional can work with you to develop an investment strategy that aligns with your long-term goals and risk tolerance.

6. Further Learning About Financial Planning for Life After Divorce

Having a strong foundation of financial literacy can help you make better money decisions. Learning and understanding more about personal finance can help you make informed decisions like how to use debt responsibly and the importance of saving and investing for goals that are important to you, like retirement, education, and travel. Invest time in educating yourself about personal finance by reading books, taking courses, following reputable financial blogs and websites, and asking your CFP^® professional questions. The more you know about managing money, the more confident and capable you’ll be in handling your finances.

Financial planning for life after divorce can be challenging, but independence is attainable. By taking proactive steps to understand and manage your finances, setting clear goals, and seeking the necessary support, you can rebuild your financial stability and embark on a new, empowered chapter of your life. Remember, every small step you take today helps to lay the foundation for a healthy and more secure financial future.

As always, if you have questions about this or any other financial topic, don’t hesitate to contact me.

Nichole Coyle, CFP®, CSLP®

Managing Partner, Financial Planner

2300 St. Clair Ave NE

Cleveland, OH 44114

216.621.4644 x1607 office

330.607.2213 cell

Securities and advisory services offered through Cetera Advisor Networks LLC, member FINRA/SIPC, a Broker-Dealer, and a Registered Investment Advisor.

Cetera is not affiliated with the financial institution where investment services are offered or any other named entity.

Investments are: Not FDIC/NCUSIF insured * May lose value * Not financial institution guaranteed * Not a deposit * Not insured by a federal government agency.

Posted In: Guest Blog, Tips For Managing Finances