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Going through financial challenges during and after a divorce can be overwhelming. I have compiled six valuable tips from business founders, CEOs, CMO, and an owner to support you in achieving financial independence. These experts provide advice on managing finances during and after a divorce, including ensuring a fair distribution of debts and understanding your finances.
Divorce Tips to Help You Handle Your Finances
Ensure a Fair Division of Debts
Adapt to the New Lifestyle Post-Divorce
Create and Stick to a Budget
Update Insurance Policies
Manage Stress for Sound Financial Decisions
Understand Finances Before and During Divorce
Ensure a Fair Division of Debts
Don't just split assets; split debts too. It's a common misconception that a divorce is only about dividing assets. But let's not forget about the debts. They're just as important, if not more so. It's crucial to ensure that all debts are accounted for and divided fairly when going through a divorce.
This includes credit card debt, mortgages, car loans, and other liabilities. If you don't, you might be shouldering more than your fair share of the financial burden, hindering your journey to financial independence.
So, my tip? Be as meticulous about dividing debts as you are about dividing assets. It might not be the most popular advice, but it's practical and works.
James Allen, Founder, CPA, CFP, CFEI, Billpin.com
Adapt to the New Lifestyle Post-Divorce
You might have gotten used to a certain lifestyle and division of income or breadwinning in the relationship. Clinging to that after a separation can stop you from grieving and building your new financial life. If you saw yourself as "someone who no longer works" while married, that might need to change at the identity level before it can change at the financial level.
The same goes for if you see yourself as "the one who works long hours" because someone else took care of the house and the personal life: you'll need to change your identity around these personal conceptions and learn to accept a different view of yourself before you can change your financial life.
Alex Boyd, Owner, Mindfully Investing
Create and Stick to a Budget
When going through a divorce, it is essential to monitor your finances and create an effective budget carefully. Without one, you could be spending money unnecessarily or not saving enough for your future.
Start by calculating your monthly income and necessary expenses such as rent or mortgage payments, utilities, food costs, car payments, etc. Once you know how much you have to work with, determine areas where you can cut back and look for ways to save money. Be sure to build in a bit of flexibility so that unexpected expenses won't throw your budget off track.
Once you have established an effective budget, stick with it and make sure to track your expenses. This will help you stay on top of your finances while giving you a big-picture view of where your money is going each month.
Keith Sant, Founder and CEO, Sell My House Company
Is Budgeting a Dirty Word?
Update Insurance Policies
Factoring in and updating insurance policies is one best practice. During a divorce, insurance policies do not change on their own. If a soon-to-be ex is listed as a beneficiary, they will still get the benefits if something unexpected happens to the policyholder.
Make sure to update beneficiaries to a child or sibling. Otherwise, they will not receive the benefits that would otherwise go to them.
Manage Stress for Sound Financial Decisions
Managing stress and emotions during a divorce can impact financial decisions. By prioritizing self-care and stress management, individuals can maintain a focused mindset for financial independence during and after a divorce. This can include regular exercise, meditation, therapy, or other relaxation strategies.
For example, taking daily walks or cooking healthy meals can reduce stress, improve mental clarity, and foster a positive outlook. These strategies can provide a solid foundation for making informed financial decisions and achieving long-term financial goals.
Roy Lau, Co-founder, 28 Mortgage
Understand Finances Before and During Divorce
Divorce can be devastating financially. However, it doesn't have to be. You can achieve a high level of financial independence after divorce by being smart about how you handle your finances. The first step is to clearly understand your finances before you get divorced. This will help you to avoid surprises after the divorce has been finalized.
Once you understand your finances before the divorce, you should create a detailed budget that can be used during the divorce process. It is important that you stick to this budget so that you don't end up in more debt.
You should also keep good records of all your financial transactions, as this will come in handy when you are negotiating with your ex-spouse about how to divide up your finances after the divorce is finalized.