Divorce is a stressful, unpredictable time in anyone’s life. Besides the emotional strain, there are significant changes in your financial outlook. If not managed properly, it could lead to a chaotic financial future. However, with careful planning and decision-making, you can take control of your own future. Let’s examine some strategies that you can take to empower yourself in crafting your own plan.

1. Review Your Settlement Agreement

I can’t reinforce this enough. Your settlement agreement should be comprehensive enough to know what you are entitled to, what you owe, and how much you will have for later in life.

Child support and spousal support obligations/receipts will factor into every loan and credit application you make until they are retired; understand what your monthly cash flows will be are essential to knowing what you can and can’t afford.

We all hope to retire at some point, and being able to communicate to investment advisors on what assets you are exiting the marriage with is an important part of designing an effective retirement plan.

If you are unsure of any part of the separation agreement, don’t hesitate to ask, ask, and ask again before you sign. Your experts are there for you, to explain and ensure that you know what the implications are of the agreement.

2. Adjust to Your New Income Level

You are now living on the income of just yourself. Purchasing decisions that you made when married are different now; you need to avoid making large purchases without understanding both the immediate cost and the future cost.

As a simple example, think of a printer. You make the initial purchase now, but you will also need to buy paper, printer ink, and perhaps a cord.

For larger purchases, take time to think of whether or not you need it, or just want it. Sleep on the decision, and avoid the temptation of professional salespeople.

3. Reduce Expenses Where Possible

Expenses can be grouped into fixed, and variable. Fixed expenses are there month in, month out such as Rent/mortgage, utilities, and transportation. Variable (discretionary) expenses go up or down depending on how much or often you use them, such as eating out, going on vacations, and entertainment.

Fixed expenses can be reduced by making choices such as moving into smaller accomodations, being energy-efficient, and switching from a larger car to a less-expensive model, or using public transit.

4. Increase Your Income

There are a wide variety of extra jobs that people are taking on now, and with remote working, it can be done in the comfort of your own home.

Figure out what skills you have, and see how you can convert that into a second income stream. Some examples include:

• Foreign Translations
• Tutoring
• Transcribing
• Home-based businesses (Etsy etc.)
• Childcare

5. Reducing Outstanding Debt

For people with credit card debt, this will be the single best way to ensure sustainable financial success. Currently, interest on credit card debt can range to over 30% per year! Making only the minimum payments will commit you to a lifetime of financial stress – take control by tackling the debt with the highest rate first, using tools such as balance transfers to reduce your overall interest payments.

Then, focus on reducing expenses (point 3) and generating extra income (point 4) to tackle the outstanding amount as quick as you can.

Then use the extra money from not paying interest to boost your savings (see below).

6. Build up Your Savings

Ideally, one should have a savings of approximately 6 months of expenses available in case of an emergency. Some people call it the “leaky roof fund”. As a newly separated person, this should be one of your goals to acheive as soon as possible; you no longer have a spouse to fall back on if there is a large unexpected expense that occurs.

Besides the peace of mind it provides, having a savings cushion allows you the freedom to make purchases that are “wants”, because you know that you have a backstop in case life throws you a curveball.

7. Choose Your Investments Wisely

It’s ok to admit that you aren’t as savvy when it comes to making investment choices – what you need to do is be inquisitive, assertive, and actively monitor your investments to ensure that you are in control of your future.

Some settlement agreements include a large payout, either as compensation for your ex’s retirement accounts, or as part of the matrimonial home disposition. How you deal with that payout will form an important part of your ongoing financial health.

Investment decisions will affect the taxes you pay, the amount of support payments you get or owe, and how much government benefits you are entitled to.

Make sure your investment professional (if applicable) is brought up to speed on all relevant details, and explains to you the implications of the choices you make when investing.

8. Regularily Review Your Budget

You looked at all of the money you earn, the expenses you have to pay, and prepared a budget that took everything into account. Great! Pat yourself on the back, but it doesn’t end there.

An important part of the budgeting process is periodically reviewing your results. Did you stick to your budget? Was it accurate? Why did your actual finances vary from what you committed to?

Once you figure out what caused the variance, you can determine the proper course of action. Some of the common issues and remedies are listed below:

It’s important to understand that a budget is not written in stone. Life happens, and flexibility is important. What you can get from a budget is a plan for managing your finances, and relief from not knowing what you can afford. As you get experience from your actual spending patterns, your budget will adjust and you become better at forecasting what money you have available for not just your needs, but also your wants.

Divorce Finances Can Help You Be The Author Of Your Financial Success

As you can see, the recipe for sustainable long-term success is not complex, but it does involve a fair amount of work. Let me help empower you to take control of your success – because ultimately you are the one who benefits the most!

Contact me for a free 30 minute consultation on how to move forward through a series of coaching sessions designed to grow your financial literacy and drive success in managing your finances.