The end of a marriage often brings about substantial financial changes. From the division of assets to the adjustment of income and expenses, divorce can significantly alter an individual’s financial landscape.
Here are some steps to help you rebuild and recover financially after a divorce.
Understanding the financial picture
Start by learning everything you can about your current financial situation. This includes knowing all sources of income, identifying all debts and familiarizing yourself with all assets. The objective is to have a comprehensive overview of the financial landscape to inform subsequent decisions. It can be beneficial to work with a financial advisor.
Developing a new budget
Creating a new budget based on a single income is a critical step toward financial recovery. Account for all monthly expenses and prioritize essential payments like housing, food, utilities and transportation. With a budget in place, it becomes easier to manage money and avoid unnecessary expenses.
If a divorce resulted in accrued debt, develop a strategy to manage and pay off this debt. Prioritize high-interest debts and strive to meet all monthly minimum payments to maintain credit health.
Building an emergency fund
An emergency fund is a financial buffer that can help manage unexpected expenses. It is typically three to six months’ worth of living expenses. Building this fund may take time, but it is a necessary aspect of financial recovery.
Planning for the future
Begin thinking about future financial goals, including retirement. If you and your spouse made previous plans, it might be necessary to reassess and establish new individual financial goals. These may include buying a house, planning for children’s education or preparing for retirement.
While the process of recovering financially after divorce may seem daunting initially, every step taken toward financial recovery moves you toward independence and financial security.