5 critical steps to help women prepare financially for divorce

As we move through the final stages of the pandemic, many couples are resuming their plans to end their marriages. These plans were put on hold during the pandemic, which explains why there was a drop in divorces in the year 2020.

When a heterosexual marriage ends, women still tend to experience the largest decline in income, with women’s household income dropping by 41% while that of men only falling 23%, according to research from the Government Accountability Office. of the United States. If you are considering moving forward with a post-pandemic divorce, below are five critical steps that all women should take to be financially prepared for this stressful transition. As a financial advisor who has also experienced divorce, these steps helped me get started on my transition.

1. Think and act

Take some time to reflect on your situation so that you can move on to the acceptance stage where you realize your marriage is over. During this time, you should seek out and assemble a team of professionals that you will need, such as a marriage counselor, divorce attorney, financial advisor, and tax professional. Having a team of these professionals will allow you to move on to the next stage in your life. In addition to the above, I also started seeing a therapist, who helped me mentally go through every step of the divorce process.

2. Open your bank accounts

If you don’t already have checking and savings accounts in your name, now is the time to open them. You should start by having your full paycheck automatically deposited into your new accounts. During this time, you could simply transfer the necessary funds to help with the house until the divorce is final. This is the first step in getting into the habit of managing your finances. I found this crucial step because I was able to regain control of my finances early on. The account opening process can also take a long time, so it’s best to start as soon as possible.

3. Start building your credit

You may have jointly held credit card accounts. Now is the time to build your credit by getting a credit card in your name. This is also a good time to request your FICO credit score from all credit bureaus so that you know how credit-worthy you are when it comes to making large purchases, such as buying a home or a ‘. car. I am proud that I was able to purchase my home while still owning a home with my ex-spouse. It was my salary history and credit score that granted the approval.

4. Get frugal

As you may know, legal fees are charged at an hourly rate, which can add up until the divorce is final. Plus, the expense of moving or losing half of your belongings will require you to start over and buy back the necessary items, such as kitchen furniture and equipment. Going through the divorce process is the time to throw away every spare penny you have. Here are some tips on how to get started:

  • Review your personal expenses and separate needs from wants. Make a detailed inventory of your expenses. You may find that you spend too much on subscriptions or make too many trips to Starbucks. This could help you find the extra cash you need during this transition.
  • Turn your emergency fund into a divorce fund by saving tax refunds, bonuses, or any other discretionary income you may have. Designate a separate bank account for this fund, one without a debit card, so you won’t be tempted to use it. Watching this fund grow can give you the empowerment and motivation to keep going.
  • Stop using credit and switch to cash for your regular purchases. A low or zero balance on your credit card may be necessary when starting a life alone. As mentioned above, you will need to have a good reputation to start your life as a single woman.
  • Automate as many expenses as you can. My ex-spouse paid the bills, so I never had to think about it. As a single mom, I thought it was a tall order, especially if the bills were due on different dates. I’ve learned that putting payable bills on autopilot keeps bills paid on time and gives you more time for yourself with less worry about missing payment deadlines and running into delays.

5. Practice independence

During my divorce experience, I created a cash flow spreadsheet template with details of my income and expenses. For example, I researched and estimated what the total cost of renting or buying a house would be. Also, I estimated how much utilities, groceries, cable, etc. would cost. living alone. This process helped me visualize what my new life would be like, while also giving me the power to believe that I can live alone again. This helped me make sound financial decisions because I knew what my budget limits were.

Going through a divorce can be one of the most stressful and draining experiences of your life. But once it’s behind you, it can also be incredibly liberating. It is important to mentally and emotionally prepare for divorce, but preparing financially is critical to success and well-being. Trust me: your future self will look back and thank you for taking care of her so well.

Wealth Manager, Merit Financial Advisors

Renora Nelson is a wealth manager at Merit Financial Advisors, where she helps her clients plan and enjoy their retirement years. With over 15 years of experience in the financial sector, she has a degree in accounting and has her 7th, 63rd, 24th and 65th series licenses. Renora has a 16 year old son and lives in Georgia.

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