It’s no secret that divorce can have devastating effects on those involved, and negatively impact their mental, emotional, and financial health. Once a divorce is finalized though, the journey to financial well-being can begin.
Establishing the following healthy post-divorce financial habits can be the key to avoiding financial hardship.
Budgeting Assistance
The last thing someone needs during a divorce is another time-consuming responsibility. Thankfully, there are helpful budgeting apps, spreadsheet programs, and websites that can track one’s expenses with less hassle. These programs allow newly-divorced individuals to manage their finances, avoid late payments, improve spending habits, and balance their budgets with ease.
Refinance If Needed
Even though debt may seem nearly inescapable for many post-divorce individuals, there are ways to help. One such technique is to refinance and consolidate loans. Existing loans with high-interest rates drain resources that are needed elsewhere. Therefore, consolidating debt and selling more expensive items- such as homes, boats, cars is an effective way to cover expenses.
Rebuilding Good Credit
Two major credit issues often affect divorced borrowers: limited credit history or low credit score from missed payments on joint accounts.
Limited Credit History
In some marriages, one partner will place significant expenses on their credit cards. This plan builds a credit score for that individual. When that marriage ends, the spouse who didn’t incur the debts has a limited credit history which results in a low credit score. Unfortunately, a poor credit score hurts individuals in more ways than one.
Without a good credit score, a person may not be approved for loans, lines of credit, rentals, and other resources.
A divorced individual with bad credit will need to start rebuilding their credit score through small and regular purchases paid off every month that demonstrates responsible financial responsibility. Discussing options with a financial planner can also help.
Closing Joint Accounts
Joint credit accounts impact the person whose name is on the loan or lease. Removing an ex-spouse’s name, or your name, from all shared accounts is a way to add financial security and ensure credit scores are not impacted by late payments.
Newly divorced individuals should also change tax withholdings to reflect their new single status.
Enroll in Health Insurance
If one spouse relied on the other for health insurance, that party will need to select a new healthcare plan to avoid having gaps in coverage.
Some employers offer healthcare packages, depending on an employee’s employment status. If that’s not an option, individuals should search for state or federal health programs that provide enrollment for particular circumstances, like a divorce.
Set New Financial Goals
Monetary goals may need to change post-divorce. When households that relied on dual incomes now solely rely on one, more spending and saving requires more attention.
Establishing a safety net of resources is a vitally important step in implementing healthy financial habits. Proper planning for life’s lows and highs is possible with post-divorce resources and strategic budgeting.
If an individual can set aside additional savings, funds should be saved in three main areas: emergency savings, short-term goals, and long-term finances.
Healthy Financial Habit Post-Divorce
Reviewing the tips provided may take the mystery out of establishing healthy financial habits post-divorce. While divorce impairs an individual’s finances, it doesn’t have to be a permanent problem. Instead of facing economic uncertainty, it is vital to create a strategic budget, learn to manage cash flow, refinance if necessary, and carry these techniques into their new life.
The most important thing is not to get discouraged or disheartened. Financially recovering from divorce takes time, but it’s more than possible. Taking charge of one’s finances is attainable through proper planning and some sacrifices in the short run.
This article contains general information and does not provide legal advice. For legal advice, please contact M. Sue Wilson Law Offices directly.