Begin Again: Shaping Your Financial Future After Divorce
A divorce can feel like an earthquake with shock waves that make their way into all the different facets of your world. And recovering financially can be one of the tougher challenges post-divorce—especially for women. After dividing finances, you may face an entirely different economic landscape: Your income level has dropped, you may be the primarily financial provider for your children, and more.
The first step to regaining your financial footing is to take stock of where you stand today. We’ll help you get started by addressing the five questions below. (Hint: It may help to create a spreadsheet with sections for each category so you can more easily view your whole financial picture.)
1. What do you have?
Understanding your assets is critical to securing your post-divorce financial future. From retirement savings to stock options to pensions and deferred compensation, know what assets you have to build on. And don’t forget to include other assets such as cash, real estate, fine art and jewelry.
2. What do you owe?
Getting real about your debts is another critical step. Consider credit card bills, car loans, your mortgage, tuition for your child(ren) and more. When it comes to assessing your debt, bear in mind that laws about who owes what may vary by state, so it’s important to determine your legal rights and obligations. In general, the debts accrued during your marriage belong to both you and your ex-spouse.
Once you have a handle on your loans, a financial advisor can help you put together a debt strategy. Different kinds of debts have tax benefits associated with them, and an advisor can help you understand what to consider before adding to or reducing each one.
3. How much income do you have?
Besides your salary, what other sources of income do you have? Are you eligible for alimony? Child support? Did you receive a portion of your husband’s retirement plan in your divorce settlement? Do your research to determine all the income sources that may be available to you. For example, if you were married for at least 10 years, you may be eligible to receive Social Security benefits on your ex-spouse’s record even if he has remarried.
4. How much are you spending?
Examining your expenses and spending habits is where you can actually begin to take action to improve your post-divorce financial outlook. Because if your financial situation has changed (and not for the better) but your spending habits haven’t, you can quickly find yourself spiraling into debt. If you aren’t already, make a concerted effort to track what you’re spending and assess both your fixed and variable expenses. A simple spreadsheet may be enough, or your financial advisor can recommend more robust tools.
Along with assessing where your money is going, you’ll also want to evaluate where it should be going. Tools like our Retirement Success Analysis can help you determine whether you’re working toward the kind of future you want, if you’ll need to contribute more to retirement savings, etc. Get in touch for more info.
5. How’s your credit?
Obtaining a credit report can help you understand the current state of your finances. You have the right to one free report every year from each of the three main credit bureaus. Request one to see what your overall score is. This will give you an idea of where you stand in the eyes of lenders. It’s also a good time to make sure the information about past credit history is accurate. If there are errors, it could negatively affect your score and even be a sign of identity theft.
Once you’re able to assess where you are financially, you’ll be ready to take action and set goals for your financial future. Work to understand the realities of where you are now, so you can face the future armed with the knowledge you need to succeed.
Have questions or want to learn more about managing your finances? Contact us, and we’ll be happy to help.
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Sweet Financial and not necessarily those of Raymond James. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members.