Illustrated by Anna Sudit.
Separation and divorce are two of the most challenging and difficult periods that a woman can experience in her life. But, while many things may still be up in the air, one aspect of your life that you should always make sure you’re in control of is your finances.
Financial planning for divorced women — or women planning on getting a divorce — is not that much different than financial planning for married couples. Examine your current financial situation, determine your future financial goals, and take a disciplined savings and investing approach to get there.
The good news: You can make plans and decisions based solely on your own personal needs and goals. There won’t be miscommunication or conflicting ideas between you and your spouse.
The bad news: It’s all in your hands. Any mistakes will be your own and a poor decision can’t be salvaged by the income or assets of a partner. And, a separation and divorce almost always leaves the individuals involved trying to play financial catch-up as the income and savings have been divided up. This new reality should include an updated snapshot of your financial life as a single adult with an eye towards insuring that your current income exceeds your expenses with the difference being invested for your future. That trip to Tahiti can wait.
According to the University of Virginia’s National Marriage Project, a woman’s standard of living drops by 27% after a divorce. Getting financially organized after a divorce can be a positive step forward. Alimony or child support aside, you need a way to bring back more of the income to which you were accustomed, and a way to restructure your personal finances so that your financial goals are still in sight.
So, don’t bury your head in the closet; take a good hard look at the numbers and craft a financial strategy that works for your life today.
Start from where you are. Take a financial inventory that includes your assets (what you own), debts (mortgages, school loans, etc.), income, and monthly living expenses. Make sure the math works: If your income doesn’t meet your expenses or you owe more than you own, your plan doesn’t add up. Plus, if alimony and child support are part of your income picture, be sure to plan ahead for the time when this cash flow will end. No matter what, don’t stop saving for retirement. Be sure to include savings in your monthly expense sheet.