Budgeting After Divorce: 7 Tips to Keep Your Finances Under Control After Losing an Income Stream
In more recent years, finances between couples have become more-or-less egalitarian. But even if you’re contributing at least half of the household expenses, losing the other half can be a major financial blow—and that’s not even considering the hit your bank account can take from the divorce itself. A divorce can be seen as an opportunity to start fresh, and the following 7 tips can get you off on the right foot.
- Update your accounts
Start out by getting organized with the logistical aspects of your finances. If you changed your name after the divorce, you’ll need to obtain a new Social Security Card, driver’s license, passport, and credit cards. Notify your bank, credit card companies, insurance companies, department of motor vehicles, utilities providers, children’s school(s), and all other relevant institutions about the change of name and/or address. You will likely also have to update the titles on all assets (such as cars and houses) as well as the policy information and beneficiaries on your life insurance, 401k, pensions, and IRA accounts.
- Downsize where possible
As a newly-single person, your financial needs are now effectively cut in half (if not more so). If possible and financially feasible, consider starting with a smaller home or apartment as a means of saving money. Move to an area with a lower cost-of-living, and trade in your car for a smaller, more practical vehicle. Limit habits like eating out, shopping, and visiting the spa while you’re adjusting to your new budget.
- Figure out your health insurance
Once you’re officially divorced, you cannot stay on your ex’s health insurance plan—although your children can and certainly should if that approach proves to be the most cost-effective. If you are currently unemployed, your employer doesn’t offer health insurance, or you simply need more time to figure out your situation, you might want to consider applying for COBRA coverage or researching coverage options on the Maryland Health Connection.
- Set up income access
Make sure to open up your own bank account and establish direct deposit or income withholding for child support, spousal support, and/or alimony payments. You’ll also want to double check the accounting for your own paychecks and any other direct deposit or withdrawal systems you have set up. If necessary, you should also use this time to apply for any assistance programs you need.
- Seek advancement in your job or temporary part-time work
If you’re currently unemployed, a vocational counselor can help you improve your candidacy in the job market. However, if you’re already employed, now is a good time to finally ask for a promotion, and/or pick up part-time work to catch up after the divorce deficit and establish greater financial security.
- Plan for tax time
In addition to taxes on the assets you receive in the divorce settlement, you will also find that tax season is very different for a single person. Review the IRS publication on paying taxes after a divorce to prepare for your new responsibilities and discover ways to minimize costs.
- Dip into your savings
Your savings account is designed to keep you afloat during times of financial distress, so don’t stress too much or be overly stingy about using these funds. Once you get back on your feet, you’ll build your savings back up in no time.
Our goal at DiPietro Family Law is to simplify the divorce process, while ensuring that your rights are upheld. We encourage you to discuss all financial concerns you might have, so we can properly accommodate your concerns and help save you money in the long run. Call us at 301.970.9286.
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