How to Move On Financially After Divorce

No doubt divorce is one of life’s toughest times, but it is also a unique opportunity to revisit your financial plan.

“Making sure your finances are on track will help you put the past behind you, and provide a foundation for the future,” says Kathy Williams, president, Advanced Financial Solutions.

Here’s how to move forward financially after a divorce.

Where to start

When you’re single, your financial needs are often very different than when you’re married. As you adjust to life after divorce, you may naturally focus on your family’s day-to-day needs, but don’t neglect your long-term finances, says Williams.

Gather information about your savings and investments, including retirement accounts so that you know exactly where you stand. Then draft a realistic monthly budget so that you have a plan that reflects your current income and expenses, not your former lifestyle.

Now, more than ever, maintain accurate financial records. “You have a new cash flow, new budget, and new tax implications. It is important to understand what your income and expenses are. Review debit and credit purchases weekly, save receipts and keep a written report of any cash transactions,” says Susan Elliott, author of Getting Past Your Breakup: How to Turn A Devastating Loss Into the Best Thing That Ever Happened to You.

Do take a look at your tax situation. Your income sources, tax filing status, and the credits and deductions for which you qualify will likely change as a result of a divorce, so review your tax situation as soon as possible with your tax or financial professional.

Reevaluate your financial goals. Do you have new goals, like going back to school? Given your new circumstances, is your retirement planning still on track?

Exercise control

“Divorce has a way of wrecking your credit,” points out Jimmy Williamson, a certified public accountant with MDA Professional Group. Why? After divorce, spending patterns and habits will likely change. “You may feel freer to spend money now that you’re in charge of all financial decisions, or you may have trouble adjusting to a new budget. If divorce has affected your credit rating, you’ll need to take steps to rebuild your record,” explains Williams.

In fact, says Scott Gramm, founder of, most married couples don’t understand that any debt accumulated during the marriage is the responsibility of both parties, and not the sole responsibility of the one who caused that debt to arise. “Pay off all debt upon a divorce,” he says.

When you’re beginning anew, the last thing you need is to start shopping to make you feel better and running up debt. “Frivolous spending can cause huge financial problems. Be sure to save money and limit credit card use as much as possible,” says Gramm. Do not feel pressured to immediately buy a home. “It’s okay to rent,” he adds.

Know too, that it’s okay to say no. “One of the biggest problems is divorcees spending too much of their limited dollars on their children, at the expense of properly funding their own retirement. Guilt giving, as we call it, may provide the single parent some temporary relief, but if repeated too often, that parent may find themselves in a terrible situation with little or no time to adequately save for their own retirement,” says Craig Hyldahl, a certified financial planner with Axa Advisors.

Avoid nasty surprises

Those recently divorced should be careful about having a car titled in one spouse’s name when the other spouse is the main driver, because in many states, if there is an at fault accident, then not only is the driver liable, but also the owner of the vehicle as well, cautions Joel Ohman, a certified financial planner.

Pay attention too, to account holder status on all credit cards, as it is easy to forget that while one spouse may have been the primary cardholder, the other spouse had full cardholder access to the account to make changes or take out cash advances, for example.

Check your credit report. “Examine your credit report and determine whether any negative reporting is due to your former spouse. If it is, contact the creditor to explain that you are divorced and that the debt is not yours. Then request any illegitimate, negative comments under your name be removed,” says attorney Sandra Radna of Radna & Androsiglio.

Depending on your divorce decree, you may find yourself without employer-sponsored health insurance after a split. If you were previously covered on a spouse’s employer-sponsored health insurance plan, you may be eligible to continue your coverage under COBRA for up to 18 months, says Carrie McLean, a consumer specialist for If you have a pre-existing medical condition, COBRA is a good option, since you can’t be declined for coverage.

However, COBRA can be expensive. If your own employer doesn’t provide medical benefits, you should consider purchasing your own individual health insurance plan. On average, monthly premiums for individual health insurance plans run 58 percent lower than COBRA premiums, says McLean. “We talk to a lot of people going through a divorce and health insurance is not always something they think about initially. It can catch them off guard when they finally realize they have to make changes to that as well.”

Know too, that while you might not have thought about it at the time, those assets you split can have long term tax affects, explains certified financial planner Rick Fingerman,

Often divorce agreements don’t address how unusual medical bills such as the dental or therapy will be handled between the spouses, or ballet, piano or baseball. “Typically we see the spouse that has the most custody or is most passionate about that expense having to burden the entire cost,” explains Lynn Ballou, principal with Ballou Plum Wealth Advisors.

The number one thing a divorcee should do is change the beneficiary designations of life insurance and retirement accounts, says Jonathan Bergman, a certified financial planner with Palisades Hudson Asset Management.

“Following divorce, most people change their wills, but retirement plans and insurance plan distribution provisions are not governed by provisions of a will,” he adds.

You’ll also want to update documents like a health care directive, power of attorney, trusts, emergency numbers, and more, advises Elaine King, director of Gibraltar Private Bank and Trust’s Wealth & Well-Being Center.

Taking smart steps after a divorce is critical. Do the right thing now and reap huge rewards later.

Sheryl Nance-Nash is a freelance writer specializing in personal finance, small business, general business and career issues. She is a former reporter for Money magazine and former staff writer for Yo more


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