18 Steps to Financial Independence During and After Divorce
It is not uncommon for divorce to initiate a financial crisis. The process itself is expensive. There are real and often high costs associated with splitting a life and creating two households. Health expenses may increase along with your (and possibly your children’s) stress levels. And that’s all assuming that your ex didn’t play dirty with money (as mine most certainly did).
Now that I’m on the other side of my own financial crisis initiated by financial infidelity and exacerbated by the legal process, I thought I’d share with you the specific steps and strategies that worked for me. Some may be pretty common sense, but others may be new to you. Please keep in mind that I am not a legal or financial expert and that the laws vary from state to state. Use these as a starting point as you take the steps back to your own financial independence.
Play By the Rules
This is not always easy to do, especially if your ex is determined to ignore or break every law out there. But it’s important. If you get caught violating the financial guidelines that are set by your state during separation and legal proceedings, you will only serve to compound your problems.
That being said, take the time to learn what is not allowed so that you can manipulate what is permissible. For example, I was not allowed to close any accounts or remove his name from accounts (Including as beneficiary; I was so afraid I would die during the process and he would end up with my retirement and life insurance. Ugh.) However, I was allowed to open up new accounts as long as I did not attempt to hide them (the funds were still considered “marital property,” he just didn’t have direct access). So I immediately opened up new checking and savings accounts and made sure my directly deposited paycheck went directly to me.
Accept Help (If It’s Available)
This is not a time for pride. If you are lucky enough to have friends or family that are able and offer to help, accept it. If you qualify for reduced fee attorney support, take it. If you can locate a counselor that operates on a sliding scale, be honest about your ability to pay. And when a friend offers to take you to lunch or out for drinks, just say “thank you” and worry about evening the score later.
Consider bartering for expenses such as babysitting or car repair. Reach out to your network and explore the opportunities. Be open, honest and creative. You may be surprised at where you’ll find help.
Create An Evolving Budget
Obviously, your budget is now different from when you were living as a married couple. And it will continue to change as the divorce process proceeds. Start your new budget by identifying your more permanent requirements: housing, food, childcare, etc. Then, add in your temporary necessities: attorney and court fees, mediation expenses, counseling, etc. Next, consider areas that may not be a requirement, but that carry great value for you, such as monies set aside to redecorate your space to make it feel safe and inviting.
Revisit the budget frequently in the beginning (at least every couple months). As some of the temporary expenses come and go, it’s important to keep an eye on the big picture and a handle on where the money is going.
Prioritize Free and Cheap Self-Care
It’s easy for anyone, but especially parents, to neglect their health and well-being during divorce. Self-care, particularly during a stressful transition, is critical. You can’t take care of your children if you don’t take care of yourself.
Look up yoga and exercise videos on YouTube. Explore your local parks. Get to know the vendors at the farmer’s market and learn about specials. Find a free meditation class in your city. Check out music and movies for free through your library and cancel the Netflix subscription. Check out Meetup.com for free and inexpensive outings and activities.
Plan For Indulgences
Too much of a sacrificial mindset often backfires (learn how). To counteract that, carefully plan for meaningful indulgences. When money is limited, make sure you invest in the ones that provide the most value for you in that moment. And be aware that these may change over time.
In the first few months, I treated myself to a massage every two months. The non-sexual touch was healing and calming for my frazzled body and mind. Later, I invested in an annual pass for the local botanical gardens, a temporary replacement for my own plants that were left behind in my old life. I always made sure to have a small, regular smile on the horizon to remind me that the situation was temporary.
Adjust Accounts As Needed
Once the divorce is final, you will probably receive the green light to make changes to any accounts that remain in your possession. Revisit beneficiary designations on insurance and retirement accounts. And then verify that requested changes are made (It took the company that holds my smaller retirement account 2 years to finally process the removal of my ex!). Take your decree to the tag office to have your car title transferred into your name. Divorce is a qualifying event for health insurance and decide if you need to remove your ex from your policy. Look at your auto insurance policy and make any needed adjustments.
If your name is changing, make sure to update it on critical documents – driver’s license, passport, etc. Be aware that a discrepancy in name can be a hassle (I’m looking at you, PayPal) and it’s helpful to change it all at once.
Whether you have always maintained a career or you were a stay-at-home parent, after the legal process is finished is a great time to explore added sources of income. Start by looking to see if there are items from your married life that you wish to sell. There’s nothing like the satisfaction of unloading a cheating ex’s jewelry and walking away with cash:)
Consider if you have any skills or knowledge that can create a passive income stream for you. Don’t worry if it’s just a trickle at first. Every little bit helps you get back on your feet.
Strive For Independence
Perhaps you were awarded alimony or child support from your ex. Or, he or she is expected to pay a certain amount towards attorney fees or to help you get started on your own. And maybe you’ll see all of those payments.
But maybe you won’t.
Child support is the one area where the law is really on your side. But even then, you cannot depend upon the money. Especially when the courts end up locking up a parent for non-payment, thus giving them no way to earn the money in arrears. And outside of child support (and in some states, alimony), you are often on your own dime to try to force payments.
So strive to find financial footing that is separate from your ex. It may not always be possible, but it’s a good goal to have.
Counteract Anger and Fear
Money is never just about money. You may find your anger flare as you face bills and hardships that feel unfair and unplanned for. You may face sleepless nights as you worry about dwindling checking accounts and ever-growing debts.
Temper your anger with gratitude. I kept a gratitude list by my computer and I added one element to it every time I had to pay a bill resulting from his debt. It was a good reminder that the financial infidelity may have been awful, but that my present life was not.
Tame your fears with mindfulness. We often worry ourselves into a rut, one “worst thing possible” following the next. If your money fears are taking over, check out my coaching course on how to thrive after divorce; I give many strategies for working with fear and anxiety. And remember, self-care is critical!
Know Your Taxes
Even if you’re used to doing your own taxes, you may want to call in the professionals for a couple years until everything is straightened out. The rules about who gets what deductions and who claims what income can get muddled. And that’s on top of a system that is already confusing.
If you were the victim of financial infidelity (AKA marital fraud) or otherwise were unaware of what had been filed and monies are owed, you may qualify for Innocent Spouse Relief. You can read more about the program and its requirements here.
Understand Your Student Loan Options
If you currently have student loan debt and you are having trouble paying your bills, look into your options. I was pleasantly surprised when I contacted my provider. They didn’t make me feel ashamed for my situation (unlike all of the other accounts I had to deal with) and they gave me several options to choose from.
Student loan debt isn’t something to mess with; the consequences for non-payment can be severe. For example, in Georgia, teachers face losing their certification if they are in default on their student loans. So know your options and make sure you stay current with your choice.
Face Your Credit Score
Divorce can do a number on your credit. As in, make the number much, much smaller seemingly overnight.
I have to admit, this is one I didn’t do so well on myself for a few years. In the very beginning, I simply couldn’t stomach it at all. I had my dad scan the reports and, keeping the actual numbers from me, verify what accounts were reported. And then I swiftly inserted my head in the sand for the next few years as I worked to improve the score. Here’s what happened when I finally looked at it.
I strongly suggest using the app Credit Karma to keep up with your credit score. It’s free and easy. And, in those days when simply peeking at the number could cause my blood pressure to rise, I found its friendly layout and welcoming colors calming.
Actively Build Your Credit
So now you know where you stand. That’s a good start.
Now, work to improve your standing. The basic credit-building advice follows here – Pay your bills on time. When you can, open a new credit card if (and this is the critical part!) you can make sure you pay it off every month. Also watch the balance even if you do pay it off. If it’s too high at the time it’s reported, it will lower your rating. Make sure that accounts are reported correctly and marked closed as you fulfill your obligations. And watch with bated breath for the magic 7-year mark when old negative marks are wiped away.
I hated even letting that word into my vocabulary, but once I met with the bankruptcy attorney and discussed the options and consequences, I felt better. I ended up electing not to go this route after deciding that it was not best for me. But I was glad that I had at least considered it and explored the options.
If your debts are overwhelming you, take the time to learn the bankruptcy laws in your state. Gather the knowledge, consider your choices and then do what’s best for you.
Reevaluate Your Retirement
Many couples piece together their retirement in a yin and yang fashion, some accounts bringing more stability and others more risky, but with a higher potential yield. In divorce, you are definitely left with less retirement monies and you may also be left with an unbalanced plan.
Once the initial emotional and financial dust settles, examine your current retirement and make changes as needed. Obviously, the closer you are to retirement, the more important this is. Especially if it extends your plans for full-time employment (If you’re in this position, I am so sorry. It’s one of the hardest parts of “grey divorce.”).
Keep Your Divorce Decree Handy
No, really. You’re going to need it. Whether it’s for changing your name on the account, eliminating your ex’s name from a title or providing some ammunition when you try to secure a loan, that expensive packet of paper is indispensable. Also, be forewarned that many organizations require the original document with the court clerk’s seal. I suggest purchasing an extra copy while you’re at the courthouse just in case your original doesn’t make it back in the mail as promised (I had to send my original in to have my passport changed).
Make (and Celebrate Reaching) Small Goals
Rebuilding your credit and securing your financial independence takes time. It’s a big (and daunting) goal. So break it into smaller goals. Even as small as paying your phone bill on time each month.
And then celebrate those small successes. It’s amazing how much ground baby steps can cover as long as you keep moving!
It is going to take time. Don’t let it take over your life or your happiness in the meantime.
After all, in the end, it’s just money.
And your life (and the lives of your children), is priceless.