After you get divorced, you are starting a whole new phase of your life. You once were one half of a legal entity. Now, you have to establish your own identity and make sure you are able to meet all your own needs.
Here are four important pieces of financial advice after divorce.
Get on a budget
Virtually every financial expert of any note will tell you that getting on a budget is one of the most important first steps to getting your finances under control.
You need to first understand how much money you have and where it is going every month. Once you know what you are spending, you can get some idea of how much you need to reduce expenses to take into account the loss of your spouse’s income and other contributions.
Establish your own retirement
Retirement can be a particularly challenging part of the divorce.
Some couples are relying on their spouse’s pension, for example, and that can be lost in the divorce.
You may also have opted to take more cash up front and fewer retirement assets in your divorce settlement. Perhaps you had to get rid of the beach house you hoped to retire to.
On the other hand, you may need less money because your spouse expected to have a more expensive lifestyle in retirement. The bottom line is, you need to start over with a plan of your own.
Build up your own credit
One of the leading credit bureaus, Experian, recommends that you first close out all of your joint accounts.
Note- This may not be legally possible until the divorce is finalized.
If done properly, though, this will end the chance that your credit will be damaged by missed payments on an account you thought your spouse was responsible for.
You then need to establish your own credit. You may need to start over with small accounts, because you may not have the same financial ability that you had when joined with your spouse.
Revise your estate plan
When you die, you are no longer control what happens to your possessions. Your possessions will be distributed according to any wishes that you properly laid out.
If you do not have the proper planning in place, the government will follow a set of default rules that may or may not line up with your actual wishes.
The most important default rule is that almost all of your property would go to your spouse. That rule goes away at divorce because you no longer have a spouse.
One common problem is that you may have assets left to your spouse that you do not want to leave to your ex-spouse. For example, your life insurance policy might list your spouse as the beneficiary. Some policies will automatically change the beneficiary upon divorce, but others may have no choice but to award your ex-spouse your life insurance money if you do not change the paperwork.
Your will, mortgage, car title, and beneficiaries on any financial accounts all need to be changed to reflect your new life.
If you are getting remarried, you may want your life’s earnings to go to your children instead of your new spouse. You will need to put a plan in place to make that happen.