Next to being laid off or sudden death, nothing can be more financially devastating to you than divorce. Very few people anticipate the financial consequences of divorce. Rarely do financial advisors helping couples plan for their retirement discuss with them the possibility of divorce. Doing so would be both speculative and bad for business. However, as the divorce rate hovers around 50%, it is not unreasonable to expect that financial advisors would help families plan for that possible eventuality. But they do not. So, the financial consequences of divorce, generally, are a shock to the family’s financial situation.
Here are 3 tips on how to mitigate the damage divorce will do to your financial situation:
Tip #1: Immediately create a list of all of your assets, debts, income, and expenses
It is amazing how many people are unaware of their net worth and their monthly budget. But when it comes to divorce, it is critical that this knowledge is ascertained so that it can be managed properly. For some people, it may be that debts need to be consolidated or expenses reduced. However, that cannot happen without this critical information. Fortunately, there are professionals who can assist with this task such as divorce coaches and divorce financial advisors. You can Google these people in your local community. For the low-cost that they charge, the value is immense.
Tip #2: Minimize your expenses
Even if this is not necessary, the exercise of reducing your expenses is an extremely valuable exercise. However, do so in a methodical and planned manner. Savings can be found in many ways such as eating out less, changing the schedule on the thermostat or assessing some of the services being charged to you on your telephone or cable account. Then, of course, there are major cuts that can occur, but this should only happen with the help of a professional.
Tip #3: Become self-sufficient and maximize your income
If possible, take on more hours. With the shift in divorce, it is important to become economically dependent and let financial stability and security be a priority, especially if you were not the sole bread-winner in your marriage. This has the benefit of not only increasing your income, but also decreasing your available time to spend your money. Let your employer know that you are interested in a promotion or an advancement. Sign up for any additional courses or training that might assist you in being offered a higher paying position. Consider taking night courses in order to obtain another certification or degree that might pave the way to higher employment income. Consider all forms of passive income such as renting your basement or changing your investments to generate greater income without adding unnecessary risk. Also, consider starting a new business from home that might bring in additional income, or alternatively provide losses that could reduce your taxable income. For this, you will need to speak to your accountant. By staying busy, not only will you protect your bank account, but this will allow for smoother transitions and you will find yourself in new routines.
Overall, divorce is one of the most common destabilizing economic events that can occur. Rarely do people anticipate and plan for this to happen. That is why, when it does happen, it is necessary for you to immediately seek professional advice, take charge of your finances, learn what they are, reduce your expenses and take steps to maximize your income. By doing so, you are reducing the negative financial consequences of divorce and opening new doors.
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