Divorce can turn your world upside down, affecting not just your personal life, but also your finances. You might find yourself grappling with a mortgage you can no longer afford, or trying to stretch a single income to cover expenses that you and your partner once shared.
Left unaddressed, these issues can snowball, affecting your credit score, retirement plans and overall financial health for years to come. But with the right approach, you can regain your footing and create the life you want after divorce.
Step #1: Assess your financial situation
Start by creating a comprehensive overview of your current financial state. This means gathering all your financial documents and taking an honest look at where you stand.
Make a detailed list of your assets and debts, including everything from savings accounts and investments to your mortgage and credit card balances. Additionally, take time to review your tax obligations under your new circumstances. This might mean adjusting how much is withheld from your paycheck or reconsidering certain deductions you previously claimed.
Step #2: Create a post-divorce budget
With a clear view of your finances, it is time to create a budget that reflects your marital status. Identify all your sources of income. Then, allocate it accordingly, making sure to prioritize your essential expenses. If your expenses outweigh your income, look for areas where you can cut back. Your lifestyle might need to adjust to match your new financial reality, but it is critical to rebuilding your financial health after divorce.
Step #3: Update your estate plan
In New Jersey, the law automatically cancels any parts of your will that would leave assets to your spouse. However, this does not extend to all aspects of your estate plan. For instance, beneficiary designations on life insurance policies, retirement accounts, and payable-on-death accounts take precedence over your will. If you do not update these designations, your former spouse may still inherit these assets, which could contradict your current wishes.
Taking control of your financial future
Rebuilding your finances after divorce is more than just balancing a checkbook. It is about reclaiming your financial independence and laying the groundwork for a future that aligns with your new goals. As you move forward, consider your divorce not an end but an opportunity to reassess your priorities and redefine your financial goals.
