You prepare for the emotional turmoil and physical havoc that divorce brings into your life, but the financial pitfalls are a bit of a sucker punch. You miss the walks the two of you took in the park, that’s true, but the loss of that second income and financial safety net is the real blow. A marriage is a financial partnership as much as anything. Reevaluate your priorities and make some changes.
Think Towards Retirement
Negotiate smarter during the divorce process. A study by financial giant ING shows that a divorced individual has $10,000 less in that retirement nest egg than a married person. You can combat some of that loss by shifting your focus to the pension.
If possible, take control of the pension plan even if it means giving up the house. The person who walks away with the retirement package will be in better shape in the end than the one who keeps the property. If that is out, suggest selling the home and splitting the equity. You can put your portion into retirement savings.
And what about that pension? Insist on a separate account in your name to give you control of your half. If the plan is a 401(k), roll it over into an IRA to widen your choice of investment options.
Details, Details, Details
Take care of business even if you and your estranged spouse are lucky enough to remain on good terms. It’s time to address the extraneous details and legally extricate yourself from your ex once and for all.
- Close your joint bank accounts.
- Change your beneficiaries
- Update your will
- You can stay friends and still act financially responsible at the same time.
Don’t Fear the Downsize
One of the perks of giving up the house is the forced downsizing. Revamp your living arraignment and lifestyle quick. Maybe it’s time to part ways with that new BMW, for example, and consider buying used. Look for an affordable apartment near work, too. If the office is in the metropolitan area, for instance, consider one of the nearby residential subdivisions.
Sit down and make a budget based on your single income. This will give you an idea of what you can afford to spend each month. Life is changing—adapt with it. Find a less expensive place to live, and look for alternative ways to get around.
Start the Rebuild
Once you get a handle on your living expenses, build your credit as a single person. Order copies of your credit reports to see where you stand. Fix any errors on the report—specifically your spouse’s credit messes attributed to you. It will be impossible to change some, but you won’t know unless you try. And last of all, speak to a good divorce lawyer and bankruptcy attorney to discuss possible options. There are many strategies you can do, post divorce to clean up your financial picture.