Starting over after a divorce can be difficult emotionally, but many people may not plan for a financial recovery. After all, new divorcees may have less income as they may be depending on one income stream, and they may have greater financial obligations. As such, planning is essential to financial recovery. This post will highlight five important steps towards that goal.
Focus on eliminating debt – Some divorcees may have to consider bankruptcy to eliminate insurmountable debt (especially debt associated with assets no longer in their possession). Even if bankruptcy is not an option, taking time to pay off debt before incurring new debt is critical.
Budgeting is key –Know what’s coming in and going out, regardless of whether you are receiving child support or spousal maintenance, is critical. Not including support or maintenance is important because permanent maintenance may not be awarded, and child support may be sporadic depending on the obligor’s employment.
Consult a financial advisor – For those who receive awards of deferred compensation from pensions or retirement accounts, consulting a financial advisor to deal with distributions is helpful.
Be careful about major purchases – The old adage about emotional purchases is important to consider. So while you may need a car or a new place to live, do so within your means.
Modify insurance declarations – Once a divorce is completed, changing beneficiaries on your insurance policy and estate plans is important. The ultimate irony would be having your ex-spouse benefit from your demise. At the same, if a minor child is listed as a potential beneficiary, you may want someone different to be appointed to make decisions on their behalf.