How to Build Financial Stability After Divorce

By Toni Husbands on 20 February 2018 0 comments

Financial instability is a reality for nearly three-quarters of this country's 25 million divorcees. A study by TD Ameritrade surveyed 2,000 participants to examine how they're coping financially after a divorce or death of a spouse. As it turns out, people facing the end of a marriage are struggling — 75 percent of divorced Americans feel less than secure financially, and half are worried about running out of money in retirement.

The average cost of a contested divorce — which can range from $15,000 to $30,000 — also throws many divorcees' finances out of whack. And it doesn't end there. Additional costs such as separate household expenses, counseling for children, and taxes or fees to sell marital assets can quickly add to the financial burden. (See also: How to Protect Yourself Financially During a Divorce or Separation)

Healing after a divorce is no small feat, but digging yourself out financially is possible. You just need a strategic plan.

Assess your assets

There is no doubt that your standard of living will change after a divorce. It's important to realistically acknowledge what you can handle financially. It may be necessary to sell a family home and downsize to maintain a workable budget. While challenging, especially if there is an emotional attachment to the home, life after divorce presents a new reality that must be addressed head-on. (See also: 5 Money Moves to Make the Moment You Decide to Get Divorced)

Seek professional advice

This is an essential step for anyone facing an unexpected change in their financial situation. Objective, third-party advice can help you avoid making knee-jerk or emotional decisions that have long-term negative consequences. A financial professional who specializes in assisting divorcees can help you deal with typical questions and decisions that people in your situation face.

Adjust your budget

A divorce will likely decrease the overall income you've been accustomed to enjoying. Once you've established a plan for the essential items like housing, it will be time to take a closer look at the luxuries you enjoyed as a married person.

This also relates to expenses for your children. Often, parents try to maintain the same standard of living for their kids to minimize the impact of a divorce. Moving to a less expensive house, downgrading a luxury car, or making cutbacks to family travel plans can help you recover financially.

Evaluate career options

Depending on your age and/or situation at the time of the divorce, you may have been out of work or planning on retiring soon. In this case, you may need to adjust your career aspirations. Re-entering the job market, investing in additional education or training, or postponing retirement are all reasonable considerations to ensure long-term financial stability after a divorce.

Automate your savings

There are many things to handle during a divorce, and saving money may feel like a bottom-tier priority. But that couldn't be further from the truth. You need savings now more than ever. The TD Ameritrade study found that almost half of divorced couples are not saving or investing anything. That compares to 32 percent of their married peers. If you have a lot on your plate, it's understandable; but give yourself one less thing to worry about by automating your savings. Having money automatically withdrawn from your paycheck and put into a savings account or emergency fund can give you peace of mind without having to think about it. (See also: 5 Ways to Automate Your Finances)

Divorce is tough. It's important to give yourself time to grieve your previous lifestyle and adjust to your new normal. Making these moves can be a smart step to help you springboard into the rest of your life without worrying about money.

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