Five Savvy Budgeting Tips for Post-Divorce Financial Success
Divorce can be expensive and if you aren’t financially savvy, you might just find yourself in troubled waters when it comes to your post-divorce finances. Transitioning from a double income household to a single one can be a financial shock, but with some smart thinking, you can get your financial bearings together rather quickly.
When you get divorced, your income often takes a hit and your expenses usually increase, as they are no longer shared. You might be left wondering how to work out a proper post-divorce budget without breaking the bank. If you feel a little lost, don’t fret. The Financial Knot® is here with some quick tips to help you put the right foot forward when it comes to your post-divorce finances.
Your monthly income is likely about to change
Divorce is not only the separation of a marriage, it’s also the separation of the marital assets shared by a household. This reorganization of your financial outlook is unavoidable—for better or worse. The first step to correcting your finances after divorce is to figure out what your post-divorce budget is. This involves looking at your adjusted monthly expenses and making sure that your monthly income is enough to cover them.
Make sure that the essentials—food, housing, utilities, insurance, internet, gas, etc.—don’t exceed one third of your monthly take home income. This will establish a reasonable budget that allows for some wiggle room for emergencies and even a small slush fund. Cutting back on non-essentials can help you keep your budget in the black if you have to tighten things up. Everyone has a different financial situation but no matter what state your finances might be in, a proper budget can help you maximize your savings.
Single household increases in spending
Small expenses can add up quickly and if you are budgeting a slim margin, the little things can end up being not so little. From bundled car insurance to streaming subscriptions, shared family plans often come with a discount that you will no longer be able to take advantage of.
Depending on your relationship with your ex, you might have to part ways with that multi-car policy discount or pay for your own Spotify account. Who really wants to have the awkward “Did you change the Hulu password” conversation two months out of a divorce (or see what their ex is watching for that matter!). When you’re a couple, you join forces to save money where you can—these small savings can really add up and are often overlooked when budgets are reassessed.
Changes to your healthcare coverage
Married couples often choose the best healthcare plan available at the best price. You and your soon-to-be-ex may have shared coverage under whichever employer plan was more attractive. If you shared healthcare coverage with your ex-spouse, you might end up paying more for health insurance than you had while you were married.
If you’re worried about the cost of healthcare, it’s a smart idea to find out what your options are. South Carolina residents that aren’t covered under employer plans should explore their options and take advantage of affordable healthcare plans subsidized by the federal government on the exchange. COBRA coverage is available, but not always the most savvy option…shop around!
Supplement your income
You can also put your professional skills to use and do some freelance work. Consider flexing those social media skills, ghostwriting, or tutoring subjects like algebra or biology. Browsing virtual job websites like Upwork or Flexjobs and freelance job boards on social media sites like Facebook can turn up good leads. Also, instead of going back to school, earn a designation or get a license. This is potentially a cheaper way to earn more money and become an expert at what you do.
Don’t break your budget
Sticking to your budget is often easier said than done. Tracking your monthly spending is a great habit to get into and can help you keep your budget reined in at the same time. Knowing where your money is going will allow you to make informed decisions about how to better balance your budget.
A deep dive into your personal spending habits can foster better spending choices and maximize your savings. Making coffee at home instead of that daily Starbucks Frappuccino, or deciding to set a weekly or monthly budget cap on the amount you spend eating at restaurants, can go a long way to freeing up some extra money.
Transitioning into a single-income household after a divorce is an adjustment for anyone but with proper planning and some know-how, your post-divorce budget can pave the way for a solid financial future. Do you need help with your post-divorce budget? Contact us today for a free consultation!
The Financial Knot® is another business name for Independent Advisor Alliance, LLC. All financial planning advice is offered through Independent Advisor Alliance, LLC, a registered investment advisor.
