Rebuilding Your Finances After a DivorceBy Jesse Giordano, CFP®, RLP® | August 1, 2019
Few things in life are as disruptive to our finances and emotional well-being than a divorce. Even if you’re the one who initiates it—and it’s a decision that feels right in your bones—honoring yourself and coming out the other side is rarely easy. Like most of life’s great challenges, though, you’ll likely emerge stronger and more sure of who you are.
In the meantime, your financial world may take a major hit. Once the dust settles, you’ll be standing in a new reality that will likely look quite different than your pre-divorce life.
The good news is that most of us are more resilient than we think, and change isn’t always a bad thing. In fact, in all my years as a financial advisor, I’ve found that rolling with life’s curve balls and course correcting along the way usually brings us to exactly where we’re supposed to be. Of course, it can be hard to remember that when you’re knee-deep in the middle of a crisis.
After the ink dries on your divorce papers, you’ll begin a fresh start in every sense of the term. Here’s how to kick off the next chapter in a way that sets you up for financial success over the long term.
Your Lifestyle Will Change
Whether you wanted to part ways with your spouse or your divorce caught you by surprise, you can expect your lifestyle to be impacted to some degree; especially your monthly cash flow. What does your income look like now that everything’s been settled? The answer depends heavily on whether or not you’ve been ordered to pay alimony.
Spousal support, as it’s also called, actually isn’t mandatory in most states. However, a court may order it. This will likely affect the higher-earning spouse because the whole idea behind alimony is to help both parties continue to maintain the lifestyle they had before the divorce. In other words, your income may dip afterwards. On top of that, alimony payments aren’t tax-deductible any longer.
Paying child support, which is calculated on an individual basis, is another factor that comes into play. No matter what, your post-divorce earnings may take some getting used to. This is especially true if you’d previously been running a business with your spouse prior to the divorce. Was it an income-generating asset you’ve been able to maintain? Or did you have to exit the business as a result?
Sorting through all the nitty-gritty details and making a new plan for the future can be overwhelming; even more so if you’re having to find and furnish a new home while in the throes of divorce. The right team of financial advisors can help you make sense of the fine points.
You’ll Need to Address Your Long-Term Financial Plan
Your monthly cash flow and immediate lifestyle needs aren’t the only things to think about. Whenever there’s a big change in your life—from experiencing a divorce to launching a business to welcoming a new child—it’s always smart to revisit your long-term financial plan.
If your retirement accounts were impacted by your divorce settlement, for example, you may need to tweak your investment strategy and get more aggressive with your contributions to catch up. Similarly, you might need to replenish your liquid savings. And if you’d been saving together with your spouse for your kids’ college, that’s another thing that deserves your attention now that you’re single.
The main takeaway is that your strategy for achieving your overarching financial goals will likely change, and that’s ok. Getting back on track is doable when you make a plan and begin taking small steps to get there.
You’ll Want a Strong Team in Your Corner
I’ve worked with enough clients to know that this can feel overwhelming to say the least. The emotional toll combined with the stress of a financial upset can feel monumental, frustrating, maybe even impossible. But what I’ve also seen with my own eyes is the power of support. Those that surround themselves with a caring, compassionate support system tend to be the ones who bounce back the strongest.
Leaning on your family, friends and therapists who have your best interests at heart can help you start to put the pieces back together. Also, securing your finances with the very best financial advisors you can trust may give you an invaluable sense of security.
After a divorce, it’s more than possible to recover—and thrive again. Opal Wealth Advisors can show you how. If you’re interested in learning more, take a look at this white paper here that details everything you need to know about how divorce impacts your finances and how to rebuild.
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