For many people, divorce can mean financial devastation or hardship. You may lose half of what you have saved over the course of your adult life, and go into substantial debt paying lawyer’s fees and other expenses. Yet for as messy and painful as divorce can be, it is often both necessary and ultimately a good thing — and it is possible to recover both financially and emotionally after a divorce.
Taking control of your finances after a divorce is one step to getting your life back on track. It can be hard to deal with your changed circumstances after going from one household to two, and from two incomes to one. However, by putting together a strategy, you can get yourself back on firm footing and take control of your finances after divorce.
Set Up a Budget
Adjusting to life after divorce can be difficult in many ways, especially when it comes to your finances. That is why it is so important to take a hard look at your financial situation. Start by setting up a budget based on your income and expenses, and cutting out the items that you don’t truly need to help you save money and live within your means. While things like 200 cable channels plus Netflix and Hulu subscriptions may have seemed necessary when you were married, they could be trimmed from your budget now that you are single. Balancing your budget — and reducing unnecessary expenditures — can help you take control of your financial life and make sure that you are in control of your finances.
Take Stock of Your Finances
When it comes to your financial situation, it is easy to be an ostrich and ignore reality — but that doesn’t mean that it’s a good idea. Now that you are solely responsible for your finances, it’s a good idea to take an inventory of your finances and see where you stand. You are entitled to an annual free credit report, which you can request from one of the three major credit reporting agencies. This report can give you an idea of where your credit stands, and can help you put together a more accurate picture of your financial health.
Use this credit report to start a list of your assets and liabilities, which can help you formulate a plan for where you want to be in the next year, five years and ten years. Perhaps you want to pay off debt, save more for retirement or improve your credit score. Knowing more about your finances will empower you to make these goals — and achieve them.
Pay Down Credit Card Debt
It can be easy to rack up significant credit card debt, especially in the midst of a divorce, when your emotions are running high and you are stressed about the process. Or perhaps you had credit card debt from the marriage itself, and want to pay it off as part of your post-divorce financial goals. However, you accumulated the debt, paying off your credit card debt is a laudable goal — the trick is coming up with a strategy for doing so.
The first step is confronting the problem head on: you can’t pay off your credit cards if you don’t have a handle on how much debt you actually have. Make a list of all of the outstanding balances you have, plus the interest rates on each. From there, you can come up with a game plan with how to pay off each card.
One plan that may work if you can afford to pay off your cards in a set period of time is to take advantage of balance transfer cards with introductory offers of zero percentage annual percentage rates. If you qualify, you could transfer the balance to that card, and then pay off the balance before the introductory period is up, saving yourself hundreds or even thousands of dollars in interest rate charges.
Otherwise, consider taking out a personal loan to pay off your credit card balances. A personal loan can be a great tool for getting rid of credit card debt because their interest rates tend to be far lower than those offered by credit cards. They also tend to be fixed rate whereas credit card interest rates can go up significantly based on a number of factors. Paying a set amount each month on a personal loan will help you get your finances in order — as long as you avoid the temptation to start spending on your credit cards again.
It can be tricky managing your life after a divorce – much less your finances. With so much change, it is all-to-easy to lose sight of keeping your financial situation in-check. If you have recently gone through a divorce, try to set aside a little time to make sure you are staying on track with your finances so you can spend the rest of your time focusing on the other things you need to do to get back on your feet.