Divorce directly impacts your finances as coping with money issues after divorce is challenging as individuals try to rebuild their lives. Some of the steps a person should take immediately to get back on track include making plans to deal with debts that your divorce left you with, considering how divorce will affect your health insurance and taxes, and setting new financial goals. Below is a guide to handling post-divorce financial debt.
Rework Your Budget to Adjust to the New Financial Situation
Divorce can mean that a person has more expenses to pay with less income. A person has to solely contribute to the household and to all the debts. Ensure your budget fits your new financial reality to minimize financial disaster due to old spending habits. You have to figure out the amount of disposable income you will have post-divorce to pay for essential expenses. Make significant changes to your home if you do not have enough cash to maintain the current standard of living while saving for retirement and staying out of debt. Consider updating your home heating and cooling units to save on future repairs, downsizing, or even using medium-colored draperies with white plastic backings, as they reduce heat gains by almost 33%.
Make Plans to Deal With Debts
Divorce leaves a person in debt due to legal bills and associated costs of ending the union. Apply proactive plans to deal with such obligations as soon as possible by refinancing your debt. A personal loan or a balance transfer may help you minimize the interest you are paying on the debt if the attorney’s bill is put on a credit card with a high-interest rate. Work out your budget and send extra payments to get back on track financially and keep the total costs down. A spouse who offers 50% of child support may claim tax exemption.
Work on Building Credit in Your Name If You Do Not Have it Already
A person needs to develop their credit history as soon as possible if there are no loans or credit cards in their name during their marriage. A good credit score is required when buying or renting a home, buying a vehicle, and applying for future loans. People who have not obtained credit in the past may experience difficulties when seeking approval to borrow from a past divorce. To access credit, you have to build it in the first place to prove that you can borrow and pay it back responsibly. If your former spouse is listed on the credit card account, request the removal of their name so they cannot continue using the funds. Spouses listed on joint accounts with their former spouses should include whoever is responsible for paying them. Talk to your divorce lawyer about this facet of cutting ties with your former spouse and about getting rid of financial assets that are a waste of money. Boats, collectibles, properties, and particularly timeshares are often undesirable following a divorce. With timeshares, in particular, 41% of buyers regretted their purchase in the first place, while 30% of neutral individuals purchasing regretted their decision afterward.
Explore Health Insurance Options
Explore various options for securing a cover of your own if you previously obtained health insurance through your ex. Secure a plan with subsidies to cater to your premiums, and consider signing up for an employer plan where you work. People covering their exes should take them off their policy to avoid being stuck while subsidizing their healthcare costs. Ensure there is no gap in the coverage for you and your kids, as one injury or minor illness may further exacerbate post-divorce financial issues.
Set Some New Financial Goals
Set financial goals now that you are on your own and take the required actions to achieve them. Think about saving up an emergency fund and retirement savings, since you do not have a partner to rely on if something goes wrong. Consider setting fun goals, including saving for a vacation, and be as specific as possible while setting such goals. Start with the essentials, including ways to rebuild your emergency savings and become free of the divorce debt and consider working on your budget to meet your objectives.
Look For Ways to Increase Income
Increasing your income sources is helpful when paying for divorce-associated debt and when dealing with a downsized budget. Look for additional ways to learn new skills and consider picking up a side gig. The extra cash allows you to overcome financial struggles and become financially stable post-divorce.
Request For Assistance If You Need It
People who are unsure where to start regarding their financial life should consider talking with a financial planner to establish a post-divorce financial plan. Seek legal assistance to help you recover unpaid child support if your ex does not pay. Make use of all the available resources to rebuild your financial life.
Rebuilding financial life may seem like a daunting task at times, but it is doable. Follow the listed steps to establish a bright post-divorce future that you look forward to.
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