Don't Let Divorce Wreak Havoc on Your Finances
For years, Kate was married — then she wasn't. For years, her husband was the sole source of income — now she was on her own.
And what was supposed to be a fresh start brought her plenty of financial woes.
Her bank account took a major hit when she moved out: first month's rent, last month's rent, security deposit, furniture — the list seemed endless. And then there was the debt to pay off — from credit cards he used! Saving money wasn't even an option.
Kate’s not the only one. While a divorce itself can cost thousands of dollars, post-split financial woes can be devastating as well. Divorce attorney Vikki Ziegler says many of her clients face the same issues: learning how to budget, saving for retirement and getting insurance.
But starting fresh doesn't have to result in a financial freefall. Personal finance expert Peter Dunn shares some tips for getting back on track:
Run a Free Credit Report
Deactivate any credit lines in which your ex-spouse was an authorized user. Beware — there’s a big difference between co-borrower and authorized user.
Change All Internet Passwords
Change your passwords and unlink joint credit cards from “one-click” websites. Don’t let someone else go shopping on your dime!
If you were on your spouse’s insurance plan, you’ll find yourself without health, dental and life insurance. Make sure to contact an insurance agent and obtain a new policy. This is especially important if you have kids, because life insurance is an investment vehicle, as well as a way to borrow funds.
Don't Be Afraid to Downsize
Fighting to keep the house is not necessarily in your best interest. It usually results in a financial burden your bank account can't handle. Don’t be afraid to rent for a while, just until you get your feet back on the ground.
Budget, Budget, Budget
Identify your new household income. Your expenses must be based on this — not what it used to be. Set up an automatic bill pay so your bills are always paid on time, and so you’re not paying extra in penalties. Saving must be a top priority in your budget. (But don’t be afraid to budget for a killer new outfit when you’re ready to get back in the dating game!)
The Bottom Line? Get Educated
Ziegler says there are no excuses when it comes to taking control of your money; you need to get educated about your personal finances. Seek a financial advisor and learn about investment tools, especially if you were uninvolved in those types of decisions during your marriage.
What happened to Kate?
She slowly turned her finances around — and so can you!