Most likely, you just went through a costly and difficult divorce, and you urgently want to know how to keep your financial life in good shape and avoid debt or worse, repossession of your car or residence. No one enjoys divorce, neither do they relish the idea of lawyer debt, but all the same, you are far from powerless. You’re also far from alone; nearly 41% of all first marriages in the U.S. end in divorce, so plenty of other people have been in your shoes. The smart ones found ways to keep their financial life together after the divorce was finalized, and so can you. Now, let’s review some sharp tips for protecting your money and assets after your divorce.
Keep Track of It All
Most likely, your post-divorce life is a confusing web of debts new and old, fees, child support costs, auto loans, your income, taxes, savings, and more, and this can be overwhelming. You might also be a small business owner, and it’s possible that your enterprise is not yet profitable. Bear in mind that only 40% of small American businesses are profitable, and don’t discount the possibility of dissolving or selling yours if need be. But you won’t know for sure what to do until you start tracking everything.
It is good advice in general to keep some financial logs, but this is especially true in post-divorce life. You may arrange some spreadsheets however you like to account for income (all sources of it), outstanding debts and fees, your current savings, the amount of money on any and all credit card you own, and more. This can give you an overall picture of where you stand in hard numbers, but that is just the start. Draft a monthly budget plan, which accounts for all income and expenses alike. For example, log your grocery spending, mortgage/rent payments, car payments, lawyer fees, insurance costs, and healthcare needs, and more against your monthly income to see what is leftover. If you are going negative here, then at least you recognize the problem, and you can take steps early on to fix it. Sitting on a bad situation out of ignorance is much worse than working out the numbers and realizing “I’m falling behind.”
You have a number of options here, from refinancing your car or living space to downgrading. For example, suppose you have a fancy sports car or luxury car, but now you cannot afford it, so you may end up selling it and buying a much cheaper car for commuting and the like. A much cheaper car will probably have lower insurance rates, too. If you can no longer afford your house, then it is time to sell, and don’t be afraid to move into an apartment for rent rather than a new house right away. Based on your finance spreadsheets, it may be a good idea to live in an apartment for a few years while you build up credit and savings until you are ready to enter the housing market later on.
Creating and sticking to a budget like this can not only allow you to pay off serious debts, it can allow you to plan accurately for the future and even create a discretionary budget. If your debts are largely paid off, or if you make a lot of money, or otherwise your financial situation is relatively good, you can allow yourself some breathing room. With an accurate accounting of your expenses, you will know how much money is left at the end of each month, and this allows you to spend a little money on yourself without cutting into your essential spending. This can range from a makeover (or even minor cosmetic surgery) to new clothes or moving to a nicer part of your home city. But be careful about this, and be sure that your budget allows it.
Money Tips: Selling Off Items
It was mentioned earlier that your post-divorce finances may involve downgrading, such as selling your home to move into an apartment. But the little things count too, especially for the likes of jewelry or rare items. If you have some urgent debts to pay off, don’t be afraid to sell your jewelry or family heirlooms, and consult a jeweler about their value. Some jewelry can be very valuable, especially if it is made well and the gems are fairly flawless. This may be an extreme example, but the costliest piece of jewelry ever used in cinema was Nicole Kidman’s necklace in Moulin Rouge. It was worth over $1 million and was made up of 1,308 diamonds and platinum. Even if your old wedding band or necklaces are modest, they might fetch a decent price, and you can sell them either to trustworthy jewelers or to private buyers online. Then, you can carefully package and ship your jewelry to their new owners.
It’s not just jewelry, either. If you have a spare car, you might just sell it and refrain from buying a replacement. Example: you have a ho-hum sedan for commuting and a muscle far for showing off. Sell that muscle car, and make the sedan your only vehicle for the foreseeable future. Right now, your overall financial life is much more important than having an eye-popping fleet of cars.
Nearly anything can be sold to private buyers nowadays, courtesy of online services such as the Facebook marketplace, Craigslist, eBay, and related sites, and there is a buyer for just about anything. Even your hobby items may be possible to sell if they are in good condition, or rare collectibles ranging from teacups and antique personal items to handmade figurines to rare books (even comic books) to posters, and anything in between. Some items are easier to sell in bulk and don’t be afraid to offer bulk discounts for items such as baseball cards or tabletop board game figurines if those are your hobbies.
Also consider local kids consignment sales for selling used kids’ stuff and maternity items.
Other Ways to Cut Spending
Adopting a temporarily conservative spending style means being conscious of literally all spending that you do, not just the value of your jewelry or car. Spending is a habit, and any habit may become automatic and therefore invisible. So, your tracker spreadsheets can help you diagnose bad spending and cull it, such as going out to bars to drink every weekend or going out to restaurants, or frequent manicures or the like. You do not necessarily have to live a 100% Spartan lifestyle, but then again, be realistic about what you can and cannot afford right now, and be ready to make your leisure spending much less frequent. Eating out every weekend becomes eating out every month, and you might save bar trips for special occasions if even that.
What else should you look out for when it comes to miscellaneous spending? Many Americans overspend on their internet service or cable or Satellite TV relative to how much they use those services, and you may consider downgrading your TV service or even drop it entirely. Don’t be afraid to cancel various magazines or video streaming subscriptions either, especially those you don’t use anymore. You might be surprised how many subscriptions are leeching your money until you make those budget sheets and see the numbers for yourself.
Also, if you sell some of your hobby items or stop getting TV services, now is the time to experiment with low-cost or even free hobbies, and you’d be surprised how many there are. Aside from buying the right shoes, jogging, running, and hiking are cost-free, and the same is true of practicing singing, using a musical instrument that you already own, drawing or sketching, bird watching, and renting library books to read. You’ll be amazed how much time you can spend with these wholesome, leisurely activities without spending a dime. Many of them are low-tech, too, meaning less exposure to electronic screens (it is often argued that Americans young and old spend too much time on screens, especially children).
Divorce is a painful and costly affair, but it does not have to end you or ruin your finances. Stay smart, keep track of the numbers, and be ready and willing to adjust your lifestyle in unexpected ways so you can land on your feet and pay off debts and save for the future slowly but steadily.