Managing your finances isn’t always simple, and a divorce can make it much more complex. It’s no secret that divorce is heartbreaking – it’s an emotional and stressful time for not only you and your spouse, but maybe your children or other family members as well.
There are steps you can take to minimize the financial damage of divorce to help safeguard your financial future. If you are separated from your spouse, considering divorce, or already divorced, here are some financial tips for surviving—and thriving.
1. Speak with a Financial Advisor. You have probably consulted with an attorney to walk you through the legal intricacies of divorce. So, it only makes sense to rely on a financial advisor to do the same for your finances. A financial advisor can help you develop a budget, and plan for future spending and retirement, given your newly single status. Meet our financial advisors and set up an appointment to develop a strategy that will work for your new financial situation.
2. Find and Organize Important Records. You will need access to a number of records as you update your marital status, name, address, and other changes. Records may include wills, social security cards, powers of attorney, retirement and investment account statements, insurance policies, credit card statements, mortgage statements, loan documents, and bank account statements. Refer to your most recent tax return to ensure that you have a list of all of your assets, and the records that accompany each.
3. Close Joint Accounts. Sometimes a divorcing spouse may move money from a joint account to an individual account, making it difficult or nearly impossible for the other spouse to recover the funds. The joint accounts to close include checking and savings accounts, credit cards, lines of credit, etc. Ask your spouse to help close the financial accounts you share. If that’s not possible, see if you can do it on your own and find the account rules in the contract you signed when you opened the account. Now is the time to open new accounts in your name.
4. Update your Will, Powers of Attorneys, and Medical Directives. If you’re like many people, you probably chose your spouse to serve the role of power of attorney, medical power of attorney and beneficiary to a will. Review these important documents to make the necessary changes and be sure to update your marital status. You can do so by writing a formal letter and include a copy of the divorce agreement, once finalized.
5. Monitor your Credit. Once you’re divorced, you may find that your credit score has been negatively impacted, especially if you have removed your name from accounts or changed your last name to your maiden name where you haven’t established credit yet. Don’t worry! Read more about how to build, maintain and improve your credit score. While it’s not recommended to run up a bunch of new debt (review these top 5 credit mistakes to avoid), there are benefits from establishing new credit and opening a new bank account and credit card in your name. Tip: Enroll in Credit Sense to monitor your credit score, view your full credit report, and receive personalized tips and tools to help build your credit.
6. Develop a Budget. Going from a two-income household to a single income is a major transition. Make sure to take stock of your income and monthly expenses – think groceries, utilities, mortgage and car payments. Review your bank statements and use this calculator to determine how much you actually spend in a month. Then, use that as a guideline for your budget. Putting a budget in place will help you avoid overspending as you adjust to your new financial norm.
7. Use Digital Banking Tools. As you begin to navigate your finances on your own, use tools that make it simple! Easily manage your finances and pay your bills with digital banking tools that can help you stay on track. At Lakeland Bank, we offer Bill Pay through online and mobile banking to help keep you organized and make sure you never miss a payment. It’s quick, safe and convenient.
8. Secure your own Health Insurance Coverage. For a lot of couples, one spouse is the main policyholder of the medical insurance plan for the whole family. When you get divorced, there is a grace period for one or both of you to find new coverage on separate policies. Be sure to talk to your employer to find out when the next open enrollment period is. If you do not have employer-sponsored health insurance available, you’ll need to research individual health insurance options. Read our blog “Insurance: Save Money Without Sacrificing Quality” to learn more about the different options.
9. Put an Emergency Fund in Place. It’s beneficial to have an emergency fund that covers at least six months of expenses. Emergencies happen, and it is important for you to be prepared for them. Creating a cash cushion is a wise idea, especially considering you’ll be on your own financially. Put away as much cash as you can, as quickly as you can. Even if it means pausing your debt pay off method and only making minimum payments so you can pay your bills and attorney. Check out these tips and strategies to stash cash and build your savings.
10. Become Savvy in Managing your Finances. In most marriages, one spouse usually acts as the financial manager and they took care of paying the bills, setting the budget, filing annual tax returns, etc. If you are not the spouse that handled these items then you may feel a little unsure of how to manage these things and it can get overwhelming. Set your own financial goals and establish a relationship with a financial advisor for new insight, advice and guidance through this new chapter.
Divorce is never something we plan for, and it can feel very overwhelming while prioritizing all of the decisions and details that need to be figured out. Remember to take a deep breath, slow down and take things one step and one day at a time. There are resources available for assistance, including our team of Financial Advisors. Both you and your finances will adjust to this major life change and the transition may be a lot more seamless than you may think.
Lakeland Financial Services is a division of Lakeland Bank.
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