Tips for Divorcees: Rebuilding Your Finances
When it comes to going through a divorce, one of the biggest stressors is identifying how to deal with finances moving forward and working through possible financial strain. Making sense of finances after divorce takes work and time, but with proper planning and a responsible approach, it’s completely doable!
Below, we’ve compiled 10 financial steps to take after a divorce that can help set you up for success.
1. Close all joint accounts
If you haven’t already taken this step, do so immediately. Review all your financial accounts and credit cards and close all the ones that are jointly owned by you and your ex-spouse. In the best-case scenario, failure to take this step can leave your accounts open to fines and maintenance charges for accounts you don’t really use. In the worst-case scenario, your ex-spouse can rack up huge bills on a shared credit card or leave a shared checking account in the red, leaving you to pick up the tab or risk ruining your credit score and financial health.
2. Change beneficiaries on your savings and retirement accounts
This step is equally important and is also often forgotten about by divorced individuals until it’s too late. Neglecting to change the beneficiaries on your accounts after a divorce can mean your ex-spouse ends up inheriting your IRA, 401(k), or another savings account after you pass away. Changing the beneficiaries on each relevant account can be done quickly and easily with a single form. Look for the designation of “primary beneficiary” and “contingent beneficiary” on each account’s form and list your choice.
3. Review your living trust and make any necessary changes
Don’t wait to review your living trust and estate plan or you may never make the necessary changes. Speak to your attorney for guidance. If your ex-spouse is the one who primarily dealt with the attorney and you’re looking for a new start, you can ask friends and family to recommend a new attorney you can use.
4. Open new accounts
Once the divorce is finalized, you’ll want to open new accounts with your name exclusively listed as the owner. This includes credit cards, checking, and savings accounts. Once you have new credit cards in your name, take steps to build up your credit quickly, such as making regular, small purchases on your cards and paying the balance in full each month.
For more information about opening up new accounts or rebuilding your credit, check out Community Financial’s online Financial Resources hub or call (877) 937-2328 to speak with a Financial Representative today.
5. Update your insurance coverage
You don’t want to get stuck paying for coverage you don’t use — or worse, get stuck with no coverage at all. Review all your insurance policies, including life, health, auto, and homeowner’s insurance, then change any plans that were shared with your ex-spouse. Pay particular attention to assets you may have listed in your homeowner’s policy as you may not own all of them any longer and each asset can increase your premium.
6. Build an emergency fund
Divorce is often expensive, and you may have wiped your savings clean after splitting up with your ex. Now that you are single again, it’s more important than ever to have a safety net that can tide you over in case of an emergency. You can open a new savings account at Community Financial for just this purpose and continue saving until you have enough to cover three to six months’ worth of expenses.
7. Adjust your budget to fit your new financial situation
You may have lost one stream of income in the divorce, but your everyday expenses will likely be considerably lower. On the other hand, you may have new expenses to cover, such as alimony and child support. Take the time to sit down and determine how your income and expenses have changed after the divorce, and then adjust your budget accordingly.
8. Update all legal documents and records
If you’ve changed your legal name during the divorce, be sure to change the name of record on all your legal documents and accounts, including your driver’s license, mortgage and housing deed, and Social Security number. You can contact your local DMV and the Social Security Administration for assistance.
9. Purchase a new safe and shredder
If your ex walked away from the divorce with the safe and shredder, be sure to replace them as quickly as possible. A home safe is the best place to keep valuables and important documents, and shredding any documents containing sensitive information that you no longer need is an important part of protecting yourself from identity thieves.
10. Analyze your investments
If your ex-spouse handled all the investing in your marriage, you’ll need to analyze your investments and create a new portfolio that fits your own investment style and needs. Consider working with an investment advisor for guidance. Community Financial offers no-cost, no-obligation meetings with dedicated Insurance & Investment Financial Consultants. To set up an appointment or speak with a Consultant today, visit cfcu.org/investments or call (877) 937-2328 ext. 8868 to get started!
Getting divorced can spell disaster for your finances, but it doesn’t have to be that way. By taking the steps outlined here, you can keep your financial independence after a divorce and start planning for a solid financial future.
Your Turn: Which financial steps have you taken after a divorce? Tell us about it in the comments.
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