Going through a divorce can be hard, especially when children are involved. It involves a lot of change in terms of family dynamics, living arrangements, and finances.
The median cost of a divorce in the U.S. is about $7,000, but more complicated divorces that involve property division and child custody can cost upwards of $100,000.
To lessen the financial impact of divorce on you and your kids, here are nine things you should do immediately after the divorce:
Table of Contents
1. Cancel joint accounts
Many married couples share bank, retirement, credit, and other accounts. As a first order of business, you should close these accounts or at least remove your ex as an authorized user.
Why? Because sharing financial accounts with your ex leaves you exposed to their financial decisions and may hurt you. For example, they may fail to pay off their credit card and hurt your personal credit score as a result (sometimes on purpose). By closing joint accounts, you eliminate potential liability.
Of course, you may need to open new accounts into which you can direct funds from old joint ones. Just make sure to open them in your name only.
2. Update beneficiaries
On a similar note, you may want to remove your ex as a beneficiary of any insurance policies, retirement accounts, and other assets.
3. Adjust insurance coverage
Now that the makeup of your household has changed, you may want to adjust coverage amounts for any life, auto, homeowner, or health insurance policies.
For example, you may want to increase the death benefit to your kids on your life insurance policy because you can no longer rely on your ex as a provider. That way, your kids will still be taken care of financially if you die.
4. Create a new budget
Whether you handled finances while married or not, you need to set a new budget. Your financial situation probably looks much different now. You may be working with half the income you are used to or have entirely new expenses, such as child support, to cover.
List all your income and expenses to see if you can make ends meet. If not, try to identify areas where you can cut unnecessary spending, such as eating out or going to the movies. To make budgeting easier, consider using an online budgeting app that can track expenses for you and help you meet your goals.
5. Pay down debt
If you have any debt, now is the time to get it under control. Try the snowball or the avalanche paydown methods. These are systematic ways to help you eliminate your debt as fast as possible. The sooner you pay it off, the better positioned you’ll be to take care of your kids and move forward with your life.
6. Start saving
On top of eliminating debt, it’s important to save. Start with an emergency fund that can cover 3-6 months of living expenses. This can serve as a safety net should you run into unexpected expenses (which we all do at some point).
Then start thinking about long-term saving goals, such as buying a new house, retiring, or paying for your kids’ college education. Save as much as you can and take advantage of tax-friendly savings vehicles such as individual retirement accounts (IRAs), 401(k)s, and 529 college savings plans.
7. Raise your income
Another way to improve your finances after divorce is to raise your income. This may require going back to school to get a degree or taking an online training program. Education is one of the best investments you can make.
Alternatively, you can increase your income by starting a side hustle. For example, you may be able to start teaching English online or freelance writing. Do some research to find a side gig that suits you.
8. Update your will
If you have a last will and testament, now is a good time to update it. For example, you may want to exclude your ex as a beneficiary or choose different guardians for your kids should you die. Look over your will to see what needs to be revised.
9. Work with a family law attorney
Finally, consult a reputable family law attorney. They can help you navigate the tricky legal landscape while going through a divorce to help make sure you, your kids, and your finances are protected. Get advice if you should change your name. Most provide free consultations, so you have nothing to lose! Contact one today to get the ball rolling.
Featured Image by Gerd Altmann from Pixabay
