Divorce is notorious for causing financial setbacks. Even those with relatively comfortable standards of living may experience financial hardship after the end of a marriage. After all, divorce generally requires the division of marital property. It also costs money.
After ending an unhealthy or unsatisfying marriage, a divorced spouse may need to think about how to rebuild their life for their future happiness and comfort. What steps are necessary for people seeking to improve their finances after a divorce?
Take a careful inventory of the situation
The first step toward rebuilding financially after a divorce is to familiarize oneself with current circumstances. A newly-divorced adult needs to know exactly what resources they have and what debts they must cover. Taking a long, thorough look at financial circumstances can help someone determine what their financial priorities need to be in the near future.
Set short-term and long-term financial goals
Rebuilding financially after a divorce is a long-term undertaking. It may take years for someone to reach the standard of living they enjoyed prior to divorce again. People can speed up that process by setting and focusing on practical financial goals. People need short-term goals, which often include prioritizing the repayment of debts as quickly as possible. They may also need to carefully limit their spending so that they can invest as much of their income as possible after fulfilling their financial obligations.
Redevelop savings and retirement plans
After someone has repaid any marital debts and financial obligations caused by the divorce, they have to start thinking about the long-term future. The investment or savings strategies prior to the divorce may no longer be optimal given the resources someone currently has. It is often necessary to review finances carefully and establish new goals for saving and investing.
Update estate plans
Estate planning documents help establish someone’s legacy when they die. Estate planning documents can also provide financial protection in the event of a personal emergency. Updating an estate plan to change beneficiaries and creating appropriate living documents, like powers of attorney, can help better protect the resources someone retains after a divorce.
It may take years of careful attention to fully rebuild financially following a divorce. However, those who are pragmatic and remain focused on their long-term comfort may find that divorce ultimately allows them to improve their overall financial circumstances. Handling a complex or high-asset divorce with a focus on long-term recovery from the divorce may benefit those worried about their financial comfort after ending a marriage.