A divorce or separation can devastate a person’s financial health, from legal fees to dispersing assets and having the exact income for the FAMILY LAW after the breakup, now financing two households. There are ways you can go about it, however, to lessen the financial consequences of separation or divorce.
- Spend less, stay within your means and reduce expenses: You must remain within the new norm regarding your household’s available income. You need time to adapt to unique financial circumstances. Most likely, you won’t be able to enjoy the same lifestyle you enjoyed when separated in the post-separation life. It’s just a fact. It is possible to track your expenditure for the next three to six months and pinpoint which areas to cut costs, set budgets, and strive to live within the limits of your resources. Separating wants from needs will assist in this. Make minimum monthly payments on your debts and include them in your budget.
- Separate Wants from Needs Separate Needs from wants Separating the essential expenses from the unnecessary is critical to creating an adequate budget that allows you to live within your budget. Needs are things like food, transportation, housing, and clothing. However, even within these areas, separating the requirements from wants is possible. For instance, moving your home down or renting instead of purchasing until you have enough money to buy, purchasing a used car instead of a luxury one or eating out more often in your home and not at take-out or restaurants, and setting a sensible budget for clothes. Additionally, waiting up to 72 hours before purchasing something could aid impulse purchasing. After 72 hours, you don’t need this item anymore.
- Make an emergency Fund Create an Emergency Fund It is vital to keep an emergency savings account. It will assist in unexpected expenses such as repairs to your car, losing your job, being sick, etc. It is best to have between three months and a full year’s worth of emergency funds. This will take time to accumulate. Create a plan to save as much money as possible using the money that remains from your spending plan. Make sure you pay yourself first. That’s right – when you have made your budget and get paid, you must pay an emergency savings account before, in the amount you had planned. Set a goal only to access your emergency funds in an unavoidable emergency. The emergency funds should reside kept in an account that is safe and easily accessible best in a separate statement in addition to your main chequing accounts. Keep one month’s cost of living expenses saved in your emergency fund. Proceed to step 4 to clear the debt. After debt free, go back to building your emergency savings account.
- Get rid of Consumer Debt. The first step is to get out of consumer debt. Aside from your mortgage, create a plan to eliminate consumer debt. When you have enough money for a month’s living expenses saved in an emergency fund, you must take on your debt. This is an absolute requirement and must be done as a top priority. If you’re in a significant deficit, take a vow not to take on more debt (living under your means as described in step 1 and staying within your spending plan). I prefer paying off the lowest to highest debt first, and not the deficit with a higher interest rate starting with the lower interest rates, but you can choose any method that interests you to keep you focused. In terms of financials, it makes more sense to pay for the highest-interest debt first. Some people like myself are more motivated to pay the debt with the lowest interest first to ensure you’ll get a winning streak earlier (i.e., paying off each debt individually is a win). Use whatever method is most effective for you, keep you focused, and adhere to your path.
If you’ve got an emergency fund and you are free of debts from consumer credit, and you are saving for retirement with the amount you have within your budget, which is not going to be used for building an emergency fund as well as the repayment of debt (e.g., for instance, if you were planning to put $500 into a debt repayment or emergency fund after that stage is complete then put that $500 toward the retirement fund). However, you must save for it from your retirement and emergency savings and not rely on the credit card to reward yourself. Going through divorce In addition, when you’re free of financial debt with a fully-funded emergency fund, be sure to treat yourself periodically by buying things you’d like, such as a trip or something else.