How to Manage Your Finances After a Divorce

by Jason on December 3, 2009

I came across an interesting statistic that blew me away the other day: 

After a divorce, a woman’s income decreases on average by 79%, while a man’s increases by 49%.

Think about that for a minute.  How would you respond to a seventy-nine percent decrease in your income?  How would you respond if your income grew by forty-nine percent? 

Unfortunately, divorce is an increasingly common thing in America these days and one that many people are facing. 

For many, managing money may be a new endeavor.  Perhaps one spouse always handled the finances and so creating budgets or balancing checkbooks is something they’ve never done.

This above statistic got me thinking about some ways to effectively manage money when the papers are signed and both parties head home to different living quarters.

1. Review/Revise Goals

This should be probably be one of the first things you do after the divorce. 

When you are ready, sit down and write out your financial goals and revise where necessary. 

This may mean you need to add a few years to your retirement goal, get an investment strategy in place or perhaps you need to make becoming debt-free your number one priority.

At any rate, studies show that writing your goals down increases the liklihood of achieving your goals.

2. Review/Change Beneficiaries

This is one area that often gets over looked. 

In a court of law, a beneficiary designation is a contract.  In spite of your desire for your 401k or life insurance proceeds to go to your kids- if you had your ex-spouse listed on the account, he or she gets the cash in the event of your death!

Most divorcees will want this changed so it’s important to review who is listed and make adjustments as soon as possible.

3. Create a budget, track expenses and save

 How many of you would rather get your wisdom teeth out than prepare a budget or track your expenses?  It’s just not one of those “bucket-list items”, but it’s a necessary thing – especially when things change in dramatic fashion as such in a divorce.

If you’re unsure where to start, I suggest tracking your expenses for a month or two by writing everything in your own expense diary.

If you find your income growing after a divorce – you need to track and deploy those additional dollars towards savings otherwise it’s easy to go out and blow that money.

 4. Seek additional ways to earn income

This is especially important to those included in the statistic above.  You may need to get another job to help with expenses at first. 

Ideally, however, it’d be great to start diversifying your income.  This could include selling your stuff on ebay, turning your hobby into a business, or even blogging to make extra money.

The ideas are endless – the point is that you’ll need to start finding some additional ways to make a little extra cash and help with knocking out debt, paying expenses and saving for retirement.

5. Dont be afraid to ask for help

This might be the most important item in this list.  Why?  Because for many of us, our pride or embarrassment gets in the way of us asking for others to help us. 

Maybe we don’t want to be a charity case or a burden – so it’s easy to not say anything at all even though we might need help with setting up a budget, determining next steps or even needing some financial help.

For the most part, most people want to help – they are just unsure how.  And unless you speak up and mention there are things you need help with – there won’t be many people offering.

A side note and a challenge for us:

One thing this statistic got me thinking about was that although we often hear of stories where the ex-wife takes everything – this apparently is not the norm.

Generally, if kids are invovled, the women take care of them  – this ex-wife now becomes a single mom whose income dropped by almost eighty percent! 

I can’t imagine being faced with that scenario and so I’d like to challenge us to consider the single moms who many are working two or more jobs to make ends meet and are having a tough go of it. 

Perhaps we should be willing to reach out more to extend a helping hand in service.

Google+ Comments

Related Posts