Getting married costs little more than the price of a marriage license. Unless the bride and groom throw a lavish ceremony, a marriage can be quite inexpensive. Dissolving the union, on the other hand, can leave an ex-spouse in financial devastation. Here are 8 steps to financially recover after a divorce.
1. Adjust Spending
A newly divorced individual will be left with only one income. During marriage, two individuals contributed to household expenses. After a divorce, ex-spouses usually have less income to cover greater expenses. Even high earners may have new financial obligations, like child support or alimony.
Divorcees who continue to spend as they did while being married are likely to invite financial ruin. It is important for individuals to revise their spending habits to better meet their current needs. Post-divorce, it becomes necessary to determine the amount of income and allocate it to expenses.
If, upon evaluation of income, the divorcee does not earn enough to stay out of debt and save for retirement, the spending budget should be reworked. Selling the marital home or downsizing a vehicle are practical ways to cut costs and avoid financial devastation in the wake of divorce.
2. Refinance Debt
Incurring high legal fees during divorce proceedings can leave an ex-spouse deep in debt. Refinancing the debt is a workable solution. A balance transfer or personal loan can help reduce the interest rate when paying the legal expenses with a credit card.
3. Build a Credit History
Building one’s credit is essential after a divorce, especially when credit cards and loans were in both spouses’ names during marriage. Individuals are urged to develop a solid credit history in their own name, since a good credit score is necessary to buy a home or apply for a loan.
Request that the ex-spouse’s name be removed from any credit cards to disable their use of the accounts. Similarly, joint loans should be refinanced so the name of the individual responsible for paying them is solely listed; otherwise, a missed payment could ding the other’s credit.
4. Revise Tax Withholding
Filing as single or head of household may be how a divorcee proceeds with taxes. Adjust the amount of money an employer withholds to reflect the new situation. A cash shortfall could result if excess money is taken out; withholding too little could result in a large tax bill.
5. Obtain Health Insurance
Divorcees who are no longer covered under an ex-spouse’s health insurance plan should seek to obtain their own insurance. The healthcare marketplace (Affordable Care Act) is an option for buying insurance; open enrollment is available after a lifechanging event, like a divorce.
Alternately, divorcees might obtain health insurance coverage through an employer. Unless the divorce decree stipulates, remove the ex-spouse from an individual healthcare policy to avoid subsidizing his or her healthcare costs. Ensure there is no lapse in coverage, or a health crisis could result in financial ruin.
6. Increase Income
The financial struggles after a divorce may be overcome by earning more money. Additional income is especially useful when paying the mounting legal fees associated with the divorce proceedings. Divorcees can also better tackle a reduced budget when they earn a greater income.
Financial stability may be achieved post-divorce by picking up a side gig or learning a new skill, for instance. More often than not, newly single individuals have extra time on their hands, which may be dedicated to bringing in extra income.
7. Set Financial Goals
Financial freedom is possible after a costly divorce by setting new goals. Single individuals should consider how best to create a retirement nest egg, build up an emergency fund or even save up for a vacation—without the financial contributions of a spouse.
8. Seek Support
Independently handling complex money matters can be a difficult road to navigate, especially after an expensive divorce. Situations like these call for professional services, like those of a reputable financial planner. Legal assistance is also available to help divorcees financially recover.
Why is divorce so expensive?
How the divorcing parties handle legal proceedings determines the expense. Cooperation between divorcing partners leads to less attorney fees, and, consequently, lower divorce costs. Conflicting spouses who go at great lengths to battle their differences will incur higher attorney fees.
Deeply rooted disputes and a lack of cooperation require more time from divorce lawyers, as the battles continue to be disputed in court. Multiple meetings, phone calls and emails with the divorce attorney drive up the financial costs of divorce.
When therapists, counselors, mental health workers and parenting coordinators become involved, the cost to divorce is again multiplied. While the services of these professionals will affect the outcome of the divorce, their time and counsel have a high financial cost.
Getting back on track financially can be achieved by making adjustments to better serve singlehood. Along with setting new financial goals, a new divorcee is advised to re-evaluate spending habits, create a plan to repay debts, build credit and determine how divorce will affect taxes and health insurance.
Work with Allen Gabe Law, P.C.
New financial responsibilities, like alimony or child support, may emerge during the course of a divorce. When you are unsure of whether or not you are eligible to receive spousal support, contact a reputable divorce law firm, like Allen Gabe Law, P.C., for expert legal counsel.
Our experienced divorce attorneys will negotiate a fair amount of spousal support. We will also negotiate child support agreements to ensure your children are well cared for. Child custody and visitation are skillfully handled by our team of divorce lawyers.
Allen Gabe Law, P.C., is prepared to fight for your rights. Divorce is difficult; but with a team of knowledgeable divorce attorneys on your side, you can expect a swift and fair process. Our firm is committed to representing clients in all aspects of divorce.
Whether you need legal guidance for property division, drafting of a prenuptial or postnuptial agreement or must secure protection in cases of domestic violence, Allen Gabe Law, P.C., will work on your behalf.
Schedule a Consultation
We handle cases for clients in Schaumburg, IL and the surrounding northwest Chicago suburbs. Call us at 847-241-5000, ext. 121 for all divorce concerns.