Going through a divorce is no small matter. Whether it’s due to differences in opinion, infidelity, or a lack of intimacy over time, the dissolution of a marriage presents many challenges.
Everyone knows about the detrimental impact that stress from divorce can have on your anatomy — from your mental health to your physical well-being. But the negative results of divorce go much further than affecting your body alone; they also have a huge impact on your finances.
Taking care of your finances ahead of time allows you to gain some control over your monetary situation post-divorce, but no one can predict what happens after a breakup. If you’re unsure of where to turn, try some of these helpful tips for coping with financial changes during divorce.
Here’s What You Should Know About Financial Changes During Divorce
Know Your Options
Emotions tend to run high after a divorce and more often than not, ex-spouses are not thinking rationally, especially when it comes to finances. Luckily, there are several options divorced couples can take when separating assets. If the thought of family court makes you uneasy, there are several alternatives families may prefer which can help them avoid hefty lawyer fees and make their internal strife a public affair.
Mediation is a possibility that many disputing exes can utilize. This is when a third and impartial participant aids in resolving conflicts. The mediator helps both parties by facilitating agreements in matters of divorce to set them up for future success. Keep in mind that any decisions made with a mediator are not legally binding and require a consent order that is approved by a judge.
Meeting with an arbitrator is another choice when splitting finances or other property. An arbitrator is a legally trained and qualified third party that makes decisions based on the division of financial assets. These decisions are binding under law and put into action once both disputing parties sign a consent order with agreed upon terms.
Finally, collaborative law is also an option. Collaborative law does involve lawyers but bypasses court proceedings by negotiating terms with your ex on a face-to-face basis. If agreements are made fairly quickly, costs can be kept at a minimum versus going to court.
Additionally, even after a consent order is filed and approved by a judge, legal action like filing for financial relief or the custody of children can still be pursued, allowing for greater flexibility when making decisions.
Create a Budget
Now that your belongings have been divided and you only have a single income, it’s time to create a budget. Often, spouses delegate certain duties to each other, like paying the utilities or managing property. However, now it’s time for you to take on the responsibility of all these obligations independently and know exactly how much you have to pay for.
A common practice for budgeting is to divide your income into a 50/30/20 ratio. This simple rule of thumb can help those in even the most dire monetary state allocate funds effectively.
To start, allow 50% of your income for your needs each month. This can range from any bills like home payments or utilities to the cost of groceries or gas expenses. Then, 30% of your income can be used for wants. This is where the money for any miscellaneous activities like dining out and quelling any random shopping urges can be used.
Lastly, leave the final 20% of your monthly income for any savings or debt repayment you’re working on recouping. One great way to watch your savings grow is by using popular money saving apps. Many of these apps create a separate savings account that administers funds into it weekly allowing you to hit monthly savings goals more easily.
Manage Debts with a Financial Advisor
A financial advisor can help put you on the right track for any debt that may have stemmed from a divorce. This can include any legal fees that have piled up while in court, any credit card debt you took on jointly with your ex or even your mortgage if you still reside in the previously shared residence.
They may suggest you put any extra funds toward existing debt or that you lower your monthly mortgage payments to improve your financial stability. At the very least, be sure to pay the minimum amount each month. By paying off your debt in a timely manner, you’re more likely to avoid sprawling interest fees. This is why it is essential to pay your bills on time.
No matter which strategies you use, practicing healthy money habits are sure to help ease the pain that accompanies divorce. Remember, sometimes it takes time to get back on your feet and there’s no set timeline for achieving financial independence. With a little hard work and even a little luck, you too can become economically self-sufficient and successfully handle these financial changes during divorce.