Jamie Lima recalls her divorce six years ago as one of the most emotionally draining and financially challenging experiences of her life. As a result, he resolved to use his professional background as a certified financial planner to help others going through similar situations.
“I want to make sure other people don’t step on the same landmines and be an advocate for them,” says Michael Divorce, founder of Ramona, California-based Elegant Divorce Solutions, a financial planning company that helps people going through divorce. says founder Lima. ,
While the financial aspect of divorce is often overshadowed by the emotional impact, rebuilding finances after a marriage breakdown can be an integral part of overall recovery. Lima and other financial experts recommend following these steps to deal with post-divorce financial challenges:
Adjust according to your new cash flow
Separating finances after divorce may mean you have to do more with less. “You want to start looking at, ‘If I walk away with half the assets and these are my sources of income and this is my lifestyle, what do I need to do?’” says Erin Voisin, CFP and director of financial planning at Torrance. EP Wealth Advisors in California. The answer, she adds, may be to change your spending habits and adopt a new budget.
“The entire timeline of your life may have to change, too,” says Megan Koepka, CFP and founder of Koepka Financial in Wilmington, North Carolina. For example, you may have to delay retirement or postpone a career change. “A lot of people are basing their mortgage and lifestyle on two incomes, so everyone has to reevaluate after a divorce,” she says.
Rebuild your safety net
Dominic Reese, CEO of Reese Financial Services, a financial coaching firm in Los Angeles, says many people need to rebuild their savings after going through the financial shock of divorce. She suggests giving yourself micro goals to avoid feeling overwhelmed.
“Everyone’s financial situation is different, but you can start with $100 and then move up to $300, then $500” and beyond, says Reese. Although saving three to six months’ worth of expenses is ideal, she admits that this amount is impossible for many people and says a smaller goal can be more motivating.
create credit in your name
Voisin says opening bank accounts and credit cards in your name only, if you haven’t done so during the first marriage, is an important step toward rebuilding finances after divorce.
Voisin says, “It’s important to build credit in your name, as well as saving for retirement in your account, updating your real estate documents to reflect the rightful owner, and any beneficiaries listed on your financial and life insurance accounts. It’s important to update.” This multistep process may take several months or longer.
While marital status is not reflected on credit reports, being divorced may indirectly impact your credit due to shared accounts or if you have used credit cards as the only authorized user on your spouse’s accounts. . After a divorce, it may be a good idea to request your free credit report to make sure it no longer lists your former spouse’s accounts or accounts previously held jointly but no longer yours.
Get help from experts
Given how complicated the financial aspect of divorce can be, sometimes turning to professionals can be worth the cost. “Before you hire your attorney, it can be of great help to hire a certified divorce financial analyst for financial assistance and a good divorce coach to guide you through the emotional aspect,” says Lima.
A certified divorce financial analyst is trained in the financial aspects of divorce. The Divorce Financial Analyst Institute can help you find one. Divorce coaches come from a variety of professional backgrounds and focus on helping clients achieve their goals for life after divorce.
Lima says consulting such professionals is something he wishes he had done earlier when going through his divorce because the third-party input helped him think more rationally, less emotionally, about separating his finances. Could have helped in taking decisions.
Talk about money early in future relationships
While most couples don’t sign a prenuptial agreement, which typically outlines how money and property is to be divided in the event of a divorce, financial experts say having one can help sort out post-divorce finances. Could be very easy. This may be especially important when remarrying later in life with greater assets or when children are involved.
If a couple isn’t comfortable talking about a prenup, they may have to do some work before committing to a lifelong partnership, says family law attorney at Sodoma Law in Charlotte, North Carolina, and author of “Please Don’ Nicole Sodoma, author of “T Say You’re Sorry” is a book about marriage and divorce. Talking about prenups, she says, it forces couples to have tough conversations about money. Which they might otherwise ignore.
“Hopefully, after having those discussions and agreeing on the prenup, you’ll put it away in a drawer or safe and never need it,” she adds. “But if you do, it would be a diagram of what segregation looks like.”
This column was provided to The Associated Press by the personal finance website NerdWallet. Kimberly Palmer is a personal finance expert at NerdWallet and author of “Smart Mom, Rich Mom.” Email: [email protected]. X: @kimberlypalmer.
NerdWallet: 7 Ways to Prepare Your Finances for Divorce https://bit.ly/nerdwallet-7-ways-to-prepare-your-finances-for-divorce
Institute of Divorce Financial Analysts https://institutedfa.com/
NerdWallet’s Kimberly Palmer, The Associated Press