When you search divorce, you find the latest Hollywood A-lister headed to a divorce attorney. From Chris Rock to Angelina Jolie, divorce is all over the headlines. Most Americans don’t have the deep pockets of Hollywood stars. Divorce is far less glamorous. The 5 money strategies that will help you manage when you’re not Chris Rock and you are financially starting over after divorce.
1. Financial survival
Living paycheck to paycheck is manageable but uncomfortable. It’s more difficult if divorce brought your savings account to zero and you know what life is like with healthy savings.
Don’t focus on what you lost in the divorce. Focus on what’s next. Then create a financial plan to reach those financial goals.
After a sudden shift of marital status and financial status, you may have to go back to basics. In the early days, it’s all about financial survival.
Dave Ramsey calls it finding your four walls. These include food, shelter, utilities, clothing, and transportation.
Let’s face it. When you divorce, your expenses skyrocket overnight. Instead of splitting the rent, you’re paying it all yourself.
Create a budget that focuses on your four walls. These are the things you need every day to survive.
Live within your means, and only tap into retirement accounts as a last resort. Talk with a financial planner or other trusted advisor before you dip into nest eggs. You could pay an even bigger financial price.
If you have divorce attorney fees to pay, ask for a payment plan. Create a budget that’s manageable with your new financial situation.
While it’s hard to do, let go of any outstanding debt. Usually, this is a house. It’s not always easy, but it’s the best way to put yourself in a spot where financial goals are possible again.
2. Find a financial planner
Now that you’ve survived the divorce, starting over means creating new goals. What does your finish line look like – is it retirement or paying off your child’s education? How are you going to get there?
Empathy goes a long way toward helping you reach your goals. Especially since trust may be an issue after divorce. A financial planner whose been in your shoes may be what’s best for your financial situation.
Starting over is always uncomfortable. Find a planner who can make it a smooth ride.
There are many types of financial advisors. A fee-only advisor always acts like a fiduciary because he doesn’t take commissions. You pay the advisor a set fee. That way he steers you toward products that are truly in your best interest.
A financial planner will help you set short term and long term goals. Remember, investing is a marathon rather than a sprint. While the outlook may seem foggy, you will figure it out.
3. Build an emergency fund
Once you are back on your feet and investing in your future again, rebuild your emergency fund. By this point, you know the value of one.
Your financial planner will help you find the best place to put the emergency fund.
4. Update beneficiaries and estate planning
When you start over after divorce, you realize the value of a lot of things that perhaps you took for granted.
Details matter. They can make the difference between starting over and reaching your financial goals.
You know how much your life changed after divorce. Now imagine a worst case scenario.
Death isn’t something anyone wants to talk about. Yet, it’s a reality of life. One we must plan for to protect surviving family members.
If there’s one benefit to starting over after a divorce, it’s that you realize life can change in a flash. You need to plan for the unexpected and that includes estate planning.
Look over your beneficiary designations and make sure they are up to date.
Create a will and power of attorney, so the plan is clear.
Also, reassess your insurance needs. Do you need more life insurance now?
Estate planning is important. Don’t overlook it.
5. Bounce ideas off a trusted friend
Starting over after divorce is difficult financially and emotionally. As a single person, you need to find a new trusted advisor who can help you navigate your new life.
Use this person as a sounding board. Their opinion is valuable.
They know you, yet, they are not as emotionally tied to the money. They can see things more clearly and their insight is immeasurable.
Use this person to discuss everyday decisions. This trusted advisor may be a friend or family member.
What financial strategies have you found most useful starting over after divorce?