Manage Your Finances in a Divorce
Your financial landscape is likely to change following a divorce. Most divorces involve a significant division of assets that can leave both parties cash-poor for a while. It's a good time to make adjustments to your spending.
Although each person’s situation is different, these general tips can help guide you in planning and managing your finances through uncertain periods.
Cover the Children
Inflation. Ask your attorney to include a cost-of-living adjustment for child support in your property settlement agreement. This will increase the support payment each year to keep up with inflation so you maintain purchasing power. It also will help cover children’s additional expenses as they get older.
Insure support. The parent(s) paying child support should have adequate life and disability insurance so that payments will continue no matter what happens.
College plan. Even though child support guidelines do not require parents to cover post-high school expenses, consider including in the settlement an agreement on saving and/or paying for children’s future college or vocational training expenses. An education will greatly increase your children’s future earning ability.
New Spending Plan
Make a new budget. Be prepared to make adjustments from your previous lifestyle. When you were part of a married couple, your budget may have had more room for spending. You’ll need a new, realistic budget for after the divorce. To pare down your spending to fit with your post-divorce income, start by identifying household expenses that can be eliminated or reduced.
Boost income. Consider ways to increase your income. Can you take on more hours at your current job? Is working a second job feasible? Have you considered starting a sideline business? If any added child care expenses would be a problem, think about work you can do from your home.
Ask for help.You might be eligible for public benefits (food supplements, for example) or tax breaks such as the earned income tax credit (EITC) as a result of your change in financial status. Local food banks are not just for the homeless; if you need help with groceries in order to pay the bills, contact your local food bank.
Live within means. Do not live beyond your means using payday loans or credit cards to finance your overspending. Eventually, you may get in over your head in debt, find it difficult to make the required payments, and risk losing everything. The smart way to obtain the desired extras in life is to save for them. A budget can help you reach your financial goals—but only if you stick to it.