Going through a divorce and its aftermath is a turbulent time, but when the dust settles and the ink dries on the divorce papers, both spouses need a fresh start in order to move forward into their new lives. But for many divorced spouses, one spouse may have a significant disadvantage. A recent study found that only 20% of married spouses share equally in making financial decisions, including investing and planning for retirement. 50% of millennial women admit that they defer to their spouses in financial decision-making, meaning they could be at a significant disadvantage when it comes to managing their finances after divorce.
While going through the Fort Collins divorce process, it’s important to establish a post-divorce finance plan beginning with 10 tips for a fresh financial start.
1. Evaluate Your Post-Divorce Income
Once all decisions about child support and spousal maintenance are finalized in your divorce, it’s important to do the math to evaluate your total income vs. expenses to create a workable budget. In the best-case scenario, you’ll have funds to put aside to invest toward retirement. If this isn’t the case, or if you find you don’t have enough income to meet your financial obligations, you may need to take action including:
Changing jobs to improve your income
Taking on a second job
Finding an extra source of income
Cut down on expenditures
By cutting out unnecessary expenditures and carefully budgeting your income you can begin building toward a more secure financial future.
2. Cancel Joint Accounts
One of the first critical steps after the finalization of divorce is to close out any joint bank, credit, investment, or retirement accounts, remove your name from joint accounts and ensure that your spouse’s name is removed from any accounts allotted to you during the division of your assets and debts.
Open your own checking and savings accounts if you haven’t already done so. Be sure to change all of your passwords on accounts you’re keeping open, including your bank accounts, streaming platforms, and any other accounts previously shared with a spouse. Double-check any subscriptions and auto-renew accounts to close out anything with your spouse’s name and reopen accounts you wish to keep in your name only.
3. Review Your Credit Report
After the finalization of your divorce, you should carefully review your credit report and address any outstanding debts as soon as possible. Be sure that your name is no longer on any debts distributed to your ex-spouse during the division of your assets and debts.
4. Begin Your Own Credit History
If you have very little personal credit outside of your marriage, it helps to apply for a credit card in your own name. If you have a limited credit history or no previous credit, you can begin by opening lines of credit at one or two retailers before applying for a major credit card with a limited line of credit to begin building your own credit history.
5. Rebuild Your Retirement Plan
Your retirement account may be significantly depleted after a divorce in Colorado due to the state’s laws for the equitable distribution of marital assets. After a divorce, it’s important to review your retirement plan and reassess what you’ll need to contribute in order to replenish it and increase it as you move forward over time. Consulting with a post-divorce financial planner can help you to put a plan in place.
6. Change your Will
If you don’t have a will, making one is a good step toward independence in a fresh financial start. If you have a will in place, you’ll want to change the beneficiary to remove your ex-spouse’s name and add the names of your children or another family member.
7. Check Your Insurance Beneficiaries
Once your divorce is final, you’ll want to review any life insurance policies and disability insurance you have in order to remove your ex-spouse’s name as the beneficiary in your policy and instead, add the name of a child or other family member. If you’ve become a sole provider, it’s important to boost your disability insurance benefit.
8. Check Your Tax Status
It’s important to check your tax projection and make sure your tax rate accurately reflects your new tax filing status. You may wish to speak to a tax specialist about modifying your withholding amount.
9. Make Changes to Your Car and Property Insurance Policies
It pays to shop around for the best deals on car and property insurance in your name only in order to streamline your budget. Many companies offer discounts for bundle deals. You can direct any monthly savings on new policies into your new savings or retirement account.
10. Use an Experienced Financial Planner Post-Divorce
The most important tip for a fresh financial start after a divorce is to consult with an experienced financial planner who can identify and address any problems you might have overlooked in your current financial plan, help you streamline your budget, and give you important information and advice for investing in your future.