Just because the divorce is behind you does not mean you are “done” when it comes to finances. Sure, some of the uncertainty is resolved, but that is not a reason to relax, fall into old habits, or lose sight of the fact that you are in a new financial reality.
What does that mean for you as you enter your newly single life?
Develop (and follow) a budget.
Even if you have never been “a budget person”, this is your opportunity to become one. There are two big reasons for that. One, your habits are stronger than you realize. Having survived the stress of separation, divorce, and (in many instances) a move, changing the way you make money decisions may not be top of mind right now. As a result, you default to the way you have done it in the past, which may or may not be supported by your post-divorce resources.
The second reason is that you cannot hope to make good financial decisions until you have a clear picture of where your money is coming from and where it is going. By simply tracking your income and expenses for a couple of months, you will be able to learn a lot about your spending patterns and make informed choices.
Re-build your emergency fund.
Married couples can rely on each other when the unexpected happens. Injury, illness, job loss and the water heater breaking aren’t nearly as devastating when you can fall back on your significant other for support. Now that the divorce is behind you, you are your own safety net. Having money set aside in an emergency fund becomes more critical than it has ever been. I recommend building up the savings balance to at least 6 months’ worth of your income.
Don’t hold on to your mistakes.
If you realize you have made a mistake negotiating the divorce agreement, work with professionals to minimize the financial impact of that decision. I have seen clients and friends keep a death grip on old ideas just because they have invested time and energy into them. No matter how hard you had to negotiate to keep the family home, if you realize that the decision translates into higher monthly outflows than you are comfortable with, consider selling it. It is always better to get these details right before the divorce agreement is signed – but fixing it as soon as you realize the mistake is the next best thing.
Which brings me to my closing point – work with a financial professional to improve the odds of making good decisions with your money. Financial planners can help you develop the budget and create strategies for making the most of your resources to re-build your financial stability. CPAs and tax advisors are there to help you avoid common but expensive mistakes that result from overlooking tax consequences of decisions. Even though you are on your own now, you don’t have to do this alone!
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