Even if it is for the best of reasons, recovering from a divorce is never an easy process. For many people, it means making difficult changes and not only re-thinking their life, but their finances as well. Once you and your ex have finished haggling over who gets what, you are left to sit down and figure out how to work with what you have. If your marriage ended because of financial troubles, as many often do, your task may be even harder as you have to clean up the debris from the financial train wreck that was your marriage. Making changes is never easy, but focusing on better money management will help make starting your new life easier.
Budgeting
The first adjustment you have to make is going back to living on one income. Even worse, if your ex was the family breadwinner, you may have to really cut back your expenses. In most cases, both parties leave a marriage in worse shape financially than they were. Make a simple list of your income, don’t necessarily depend in income like alimony and/or child support that could be unreliable, and create a list of your expenses. If your income doesn’t exceed your expenses, then you are going to have to make some sacrifices. If you’re one of the fortunate people whose budget still balances after the divorce, then saving some of your money is a very good idea.
Understand What Filing Bankruptcy Means
After a divorce, many people make the mistake of filing bankruptcy without knowing the full ramifications of their decision. Bankruptcy will likely absolve most of your past debts, but it will also dramatically damage your credit rating and could possibly harm your hiring chances with some employers. Bankruptcy really should be a last resort after you have created a budget and determined that there is no other way that you can repay your debts on your current income, no matter how much you cut back. Bankruptcy isn’t always the “easy way out” and could make your finances worse instead of better.
Debt Consolidation/Debt Settlement
Before you file for bankruptcy, you should also understand the differences between different debt resolution plans. Debt consolidation typically involves taking out a loan and using the money to pay off your other debts. With debt settlement, you work with an agency that negotiates with your creditors to accept a lower pay off amount than what you owe. Between the two, debt consolidation is the better option because it doesn’t hurt your credit score, but depending on your finances, debt settlement may be the only solution available to you. In either case, you should find a reputable debt resolution company to help you.
Consider Selling the House
While it’s understandable to want to keep the home that you spent many happy years in, it may not be feasible given your current financial situation. Even if you have kids that still live at home, the cost of keeping up with your mortgage, repairs, property taxes, etc., may be more than you can handle on your own. While saying goodbye to the family home isn’t easy, it may be a necessity if you don’t want to find yourself drowning in debt. The perks of being a homeowner are great, but it might be more fiscally responsible for you to become a renter and cut some of your housing expenses.
Re-Evaluate Your Vehicle
Many couples with dual-incomes like big cars for a variety of reasons. There are some legitimate justifications why some “soccer moms” need mini-vans and why some men want 4-wheel drive SUVs so that that can make it into work no matter what the weather is. However, look at how your situation has changed. Do you still need that big vehicle or can you get by with a less expensive compact car? Switching to a smaller car will help you beat gas prices and reduce the costs of your commute, running errands, etc. Right after your divorce is not the time to consider buying that “dream car” you’ve had in mind but your ex vetoed. Consider downsizing instead.
Avoid Dating Debt
Some people want to remain single for a while, but others have a desire to jump right back into the dating scene to find someone that meets their needs that went unnoticed by his or her’s previous spouse. That is perfectly understandable and legitimate, but can you afford it? Signing up for match.com and finding some companionship will help ease your loneliness, but it can also be a recipe for financial disaster. Going Dutch – where both parties pay their own half of the bill – is more common than ever these days and can lead to some very expensive nights out. Limit your date nights to what you can afford and don’t go over your budget just to impress someone.
Don’t Get Crazy
For many people, after feeling stifled in a bad marriage, it’s a natural reaction to want to “go out” and “be crazy.” This type of thinking will inevitably bring you financial trouble. Give yourself time to adjust to your new emotional and financial situation and don’t start spending like there is no tomorrow. You will be much better off if you lean towards being frugal and get a handle on your personal finances first. Divorces are emotionally devastating and you can’t just spend your unhappiness away. Once the spending has to end, the “financial hangover” will leave you feeling much worse. Take time to adjust to your new life and don’t overcompensate by overspending.
What happens next is almost always the biggest questions divorcees have in their minds. After years of living with someone else, it can be difficult to find yourself again. The best thing you can do is remember that not only has your life changed, but your finances have changed as well. As difficult as it may be, you have to deal with your feelings and your money, otherwise you are liable to create financial trouble, or add to your existing troubles, that is completely unnecessary and makes transitioning to your new life that much more difficult.
About the Author: Tony Standin is a personal finance specialist who enjoys helping people learn to live frugal, financially stable lives – especially when they’re bouncing back from life-changing events.
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