Divorce is a tumultuous time emotionally, mentally, and of course financially. The period after a divorce is no less stressful and uncertain as the time before. Unfortunately, it is during this vulnerable time that people fall into debt, bankruptcy and ruined credit scores. It is important to allow yourself as much time as you need to learn to readjust, but maintain a vigilant grip on your finances. It will be harder to make a full readjustment if you are buried in financial woes down the road.
This is no easy task. Your bills will not be sensitive of the time you need to recover. It may take some time, depending on your situation and personality. That’s okay; as long as you stay committed to doing what’s best for your future self.
Know the Bare Total of all your Sources of Income
This income estimate should be subject to taxes, any alimony or child support payments you have. What does it amount to for each year, each, month, each week? What spending money do you have?
Know Your Expenses
What do you spend money on every month, in fixed payments, and inconsistent payments? Make an excel spreadsheet and lay it all out. At the top, start with the non-negotiable and the higher payments you make. These could be larger fees like car payments, mortgages and other debts, but this utilities, rent, and schooling for children, and groceries. Filter the less essential payments to the bottom, such as gym memberships, Spotify and Netflix subscriptions, vacation spending, etc. You should also include fluctuating spending, which typically accounts for “treat yourself” spending, such as trips to the spa or golfing. These are small luxuries. Look at your bank statement and figure what you tend to spend money on, and how much you spend every month.
Know your Essential Expenses
The spreadsheet helped ease you in, now it’s time to make decisions; prioritize your spending. What are your most important expenditures. What’s extra? Downsize if you can. Your SUV and 6 bedroom house may have made sense before your divorce, but you could probably get by just as easily get by with less. As for those fluctuating, little luxuries–you may have to do without for a period of time. Remember that these changes are not permanent; if you absolutely need a little luxury, at least consider cutting back.
Set Your Financial Goals
Your spreadsheet will help you stay on budget, but it should also move you forward in a specific direction. What do you want? How much do you need to save for it? Set up a savings account if you haven’t already, and include this in your budget to put money into every month.
Stay on Budget
This is the hardest part. Know you’re not going to be able to keep to it 100% of the time, and allow yourself to make a few mistakes when you need. But sticking to it will ultimately help you achieve financial freedom. Stick to it.
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