Is Divorce Ruining Your Finances?

Is Divorce Ruining Your Finances?

Divorce takes it toll on all areas of our lives but it is possible to minimize the financial damage during the process and to begin picking up the pieces when it’s over. If you are just beginning the divorce process read get our e-book here and learn the “10 Things You Should Do Before You Even Think About Divorce”. If you are already divorced or you are about to be and your finances are hurting this article is for you.

1. Get a copy of your credit report. In the United States you are entitled to a free credit report every twelve months or anytime you have been denied credit. There are three credit bureaus that track our credit status in the US: Experian, Equifax, and Transunion. You will want to get your credit report and your score from each of these. Your credit score is mostly based on the length of time you have had credit (longer is better), the amount of your available credit you are using (less is better), and whether you pay your bills on time (obviously better). First look for errors in your report. These can be fixed by submitting a dispute with the credit reporting company. Next look to see if there are collections or judgments on your account. If the amounts are small you may be able to pay them off and negotiate the removal of the information from your report. If you and your spouse agreed to take certain debts, look to see if your name is on any of the debts your spouse is now responsible for paying and try to get your name off of these as quickly as possible.

2. Apply for credit in your name alone. If your spouse has had most of the credit in his/her name you will want to quickly establish credit of your own. Joint credit accounts can be closed at the request of either party to the account. The creditor does not have to issue credit to the individual that was part of the joint account. They can request you reapply for credit based on your own earnings and credit score.

3. Make a budget. Many times in a marriage only one spouse is responsible for managing the finances and paying the bills. It’s important that you quickly figure out how much income you have and how much your bills are going to be each month. Make sure your budget includes emergency purchases such as a repairing a leaky pipe and things that are replaced at longer intervals such as buying new tires for your car.

4. Change your life insurance policy. You will want to get life insurance for yourself if you don’t already have it. You also want to designate a new beneficiary for your policy. While you are at it update your will and any health care directives you have. You may not want your ex-spouse having authority to pull the plug if you are in a serious accident.

5. Start saving for retirement. It may be that both you and your spouse saved during your marriage but often only one spouse is saving for retirement. Hopefully you discussed this with your attorney and worked out a settlement that took retirement benefits into consideration. Regardless, you will want to start saving for your retirement in your own account.

While starting over may seem like an insurmountable task, by breaking it down into smaller “to do’s” you can get your financial health back on track.