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Divorce is not only emotionally draining but it can also be draining on your finances. So how does one become financially stable again? How does one recover?
First, let’s take a look at your finances. Expect your income to drop after divorce. Now that the obvious is stated, now what? What’s your new budget look like? Start by self reflecting on what the current situation is. Next, begin creating a spreadsheet of all of your expenses and what your current income is. Sometimes we don’t realize our spending habits, so it’s helpful to see it in front of our eyes to be able to evaluate it properly. Make sure to print out all of your bank records and go through your spending habits and expenses. Where are you negative? Where are you ok? What areas can you afford to cut back on? Are you eating out when you should be eating at home? Is there a better car insurance plan you could use? Where can you make room for improvements?
Is your rent too high?
Can you refinance your mortgage?
Can you consolidate your debt into a debt with a lower interest rate?
Is your daily Starbucks habit costing you thousands per year?
Managing your finances can be a little chaotic and even overwhelming at first. The first step is just to start! Get ahead of the problems and don’t let them pile up! Educate yourself on everything you are spending in addition to what budget calculations you should be more aware of. Also, what assets do you currently have? Real estate, cash value life insurance, cash value personal property, retirement funds or other investments? Evaluate what you currently own, what you can sell, what you can keep and what you can cash out on to help prevent you from drowning in any debt.
Next, where can you afford to cut down on your expenses? Ask yourself… Do you need to pull out a loan on anything? Do you need to refinance something? Is there anything you need to sell? How much debt are you in and how much can you afford to cover per month? Are there any debt agencies that can help you cut down or consolidate those expenses? Break each problem down with a question. Solve each problem by answering each question.
Divorce may cut into your emergency savings. If this happens, start setting aside a percentage of your income for an emergency fund again. It may be a slow, gradual, process but you will thank yourself later on for starting it now while you are “budget-focused”.
Finally, start applying for a new line of credit. A credit card used responsibly for bills or other things you might normally have to pay for is a good way to help build your credit. Next, ask for a promotion at your job or start looking for a higher paying job.
Lastly, what are your new financial plans? Are there expenses that you used to have when you were married that you no longer have? How can you redistribute that money to cover other expenses so that you are not drowning in debt? How do your new finance plans set you up for success for the next 5 or 10 years? Will the plan include you building up your credit again? Do you need to hire a financial planner? There’s plenty of free websites and free resources online too!
This may all seem scary and overwhelming but remember, you’ve already survived the scariest thing that you could experience….and you are already surviving through it!
Now it’s time to take control of your finances and seize your life back!