We talked about what to consider before divorce, as well as navigating divorce. Now, let’s touch on a few things to do coming out the other side, in order to move forward with confidence and a financial plan intact!
According to statistics, divorce can result with women experiencing a 27% financial decline, while men sometimes actually experience a 10% increase. This is thanks to the Gender Wage Gap, which generally keeps women behind men in the amount of building their wealth during their working years. In addition to pay disparities, this is also due to women losing years in the workforce while tending to caregiving for children or parents.
While general rates of divorce itself are trending downward, “Grey Divorce” (divorce over the age of 50) is actually increasing in frequency, and women getting out of a divorce in this age group may see a financial drop of up to 45%. Read below for few strategies in order to both stay-above-water and make gains post-divorce.
Figure Out Where You’re At:
Determine Your Net Worth, analyze your debts, and update your Spending Plan (aka Budget). Calculate your Net Worth (take all of your assets and subtract your debts) in order see if you’re in the positive or negative.
Next, look at your debts and write down all of their interest rates. Prioritize paying down any debt that exceeds 7% interest. 7% is generally the number at which you would make more money investing your funds, than prioritizing paying down that debt. In other words, some low-interest debt is ok as long as you’re investing your money as well, which will generally generate a 7% or higher rate of return on your money.
In order to ensure the trajectory of your Net Worth trends upward (even if very slowly overtime) update your Spending Plan. A sustainable Spending Plan, or budget, typically consists of Needs and Fixed Costs at 50% or less of your monthly take-home pay, and Wants at no more than 30%. The rest, 20%, is usually used for Goals like savings, Retirement Savings, etc.
Pay attention to how your financial responsibilities have changed; you might be the sole payer of the mortgage, or have to find new health insurance. Work these into your new Spending Plan.
Identify Your Most Pressing Financial Needs:
Based on the information you determined above, identify the urgency of any financial matters or debts that need to be paid off. You may need to sell some assets, downsize, or find additional income. If you’re stuck on how to bring in more income, hire a career coach. Having someone in your corner will expedite the process, and build your confidence along the way!
Set specific financial goals with timelines. Use the SMART method and check that they are Specific, Measurable, Achievable, Relevant and Time-based.
If you’re focusing on Savings, start small. You do not have to fund everything at once. Even $1k as an Emergency Fund in a High Yield Savings Account (HYSA) will add up quickly with the higher interest you’ll be gaining, and that amount will get you through most small flare-ups. Overall, aim to save for 3-6 months of the NEEDS that you identified in your Budget.
If you’re behind in Retirement Savings, don’t fret, just get started. Automate a small amount to go directly from your paycheck, if possible, to either a work-sponsored plan or your own IRA that you can open for free online. Eventually, shoot for 15% of your gross annual income to be set-aside for use in Retirement.
Update Important Documents:
Update all Estate Plans, Beneficiaries, and Emergency Contacts. Note: beneficiaries on bank accounts actually supersede anything written in the Will, so make sure these are up-to-date! If you have minor children and have yet to write up a Will, this is your opportunity to ensure that you have a say in their custody, should anything happen you and their other guardian.
Get written confirmation that all joint bank and credit accounts were actually closed (or your name was removed) and continue to keep an eye on your credit score as you re-build financially. Check that your credit reports (all three! Trans Union, Equifax and Experian) no longer show you belonging to any joint accounts, and challenge any inaccurate information. Note: Divorce does not absolve you from creditors coming after you for balances accumulated on joint accounts, so you really want to make sure you’re no longer listed as an account holder.
Turn Towards Support:
Check where you are resourced, relationship-wise. Who was in your support system that helped you get through this tough process? Foster those relationships. Whether it’s a Life Coach, or a good friend, you may even be able to count on someone for accountability around your new goal setting. Set a little time aside to check-in on your goals and progress regularly.
This is the new you! Live it up and bask in your new found freedom! Identify exactly what you want and go after it!
Unlocking Abundance 