After your divorce, you may wonder how you will gain financial independence. Financial matters may feel especially daunting if your spouse was the primary breadwinner. However, it is possible for you to support yourself. There are several strategies you can use to regain control of your finances after your divorce.
How to Gain Financial Independence After Divorce
Divorce can wreak havoc on your finances for several reasons. The first is that ending your marriage is an expensive process. You usually have to pay your legal fees and you may need counseling as well to help you come to terms with the situation. Additionally, you may not have had time to prepare your finances for divorce. If you chose to stay at home with your children, you also may not have a steady job that supplies you with income. Even a part-time job may not be enough to cover the costs of your life after the divorce. All of these situations and more, make it difficult to find financial independence.
Look to Your Life Insurance
You may consider your life insurance as a way to support your children after your death. However, this insurance can also help during your lifetime. You can leverage some of the money from your life insurance, a strategy called cash flow banking. This is similar to taking out a loan, except it gives you more financial freedom. You don’t have to repay the principal of the money you leverage, just the interest. Additionally, your insurance policy can still grow even after you take the loan out. If you choose to pay back the principal when you are financially stable, you can do so at your own pace.
Examine Your Financial Independence
You cannot support yourself and your financial independence if you do not understand your finances. Look over your tax returns and the statements from your retirement and investment accounts. This can help you understand the resources available to you. Make sure you close your joint checking and savings accounts and open new accounts in your name so you are the only one who has access to your money.
Create a Solid Budget
You may already use a budget to help you manage your finances. However, you may need to revise your budget after your divorce. Make a list of all your expenses. Include the cost of buying birthday and holiday gifts for your family members, as well as other seasonal purchases. This allows you to see where all of your money will need to go and ensures you won’t be surprised by purchases down the road. If your expenses are more than your new monthly income, look over your budget to see where you can cut back.
Reassess Your Financial Goals
During your marriage, you may have focused on saving for retirement and your children’s college expenses. While you and your spouse will likely split college expenses and while you may have received half of the retirement savings, you will need to make up the rest of the money by yourself. Sit down and identify your new financial goals now that you are supporting yourself. Do you need an emergency fund? Do you have debt you need to pay off? Prioritize these goals so it is easier to meet them. If you don’t have an emergency fund, for example, you may want to create this account before you start saving for retirement.
Earn More Income
If your current salary will not support you, you need to pad your paycheck. You may want to get a side gig that you can do on the weekends or at night, such as dog walking or bookkeeping. If you have a part-time job, you should speak to your supervisor about a full-time position. Additionally, you might consider getting more education. This can take the form of a certification or you may decide to go back to school.
Use Your Network
You probably know people who have had to rebuild their finances after a divorce. Speak to your friends and family members and ask them what steps they took. Another person’s strategy may not always work in your situation, but you may get new ideas. Additionally, it’s a good idea to join a financial support group. This can help you see what other methods people have used and provide a supportive setting as you meet your new financial goals.
Rebuild Your Credit
During your marriage, you may have had joint credit card accounts with your spouse. You need to make sure you have a credit history in your name. This is important because your credit score is one of the factors people consider when you apply for a loan or buy a home. If you have never had a credit card in your name, there are many options you can consider so you can build credit.
Rebuilding your finances after divorce may initially feel impossible. If you take several small steps, though, you can manage your finances and learn to support yourself.