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How to survive and thrive financially after a divorce?


1. Prepare a New Budget

Since you are expecting a drop in income and have access to fewer financial resources you need to develop a new budget. If you have children then your budget should take into consideration how much child support, partner support, and monthly income from other sources you will need to sustain yourself. You should also consider what if your ex can no longer pay you the child support or partner support. If you are planning to be a stay-at-home mother, how would you feed yourself and your children if your ex is unable to make payments? Also, if your children will soon become adults then your ex will no longer be obligated to support them.


To develop a budget, you should make a list of every expense that is recurring monthly. You should also make a list of bills that you will pay bi-monthly, quarterly, every 6 months, or annually. For example, you might end up paying some utility bills every other month, property taxes every six months, or an insurance premium annually. You should also add monthly clothing, food, transportation expense, and any possible emergency expenses. Examples of emergency expenses are - car repair, medical co-pay, or an out-of-town family trip to attend a funeral of a loved one. If you are planning to take any classes to retrain yourself that should also be taken into the account. In addition to that, you should also budget for investing in your children's college education fund, and your 401k or IRA to fund your retirement. Your total budget shall not exceed your income.  


Once your draft budget is ready, it may be wise to have a financially savvy friend or a financial advisor review it. If the reviewer gives any feedback to make changes then be open-minded about it. A good budget can be the foundation for your long-term financial success after the divorce.


2. Maintaining a House After Divorce

In most divorce cases wife usually ends up keeping the house because she became the primary custodian of children. In some incidents, the husband may end up keeping the house too. In other incidents, one spouse buys the house from the other by doing a cash-out mortgage refinance, or they simply sell the house.  


If one of the spouses ends up with the house, whether they can afford to maintain it or not entirely depends on their income and other financial resources. Being able to win the homeownership battler from the other spouse can be very gratifying emotionally. However, it might not make any financial sense because the money locked in the home equity cannot be used to pay bills. House maintenance and repair costs can run into thousands of dollars and depending on the location and value of the house property taxes can be a big burden too.


But this doesn't mean that a single parent entirely cannot afford to keep the house. Several hacks can make housing more affordable.


a. Renting and Downsizing

You can rent your current house and use that money to buy or rent a smaller home.

b. House Hacking

Renting a room or a separate basement to a third party. That can generate enough income to pay property taxes and other maintenance costs. However, it comes at an expense of compromising your privacy.

c. Birdnesting

You or your spouse can rent another property nearby and live in the house in alternate weeks so that children do not have to shuffle around between two homes. This is not very practical but doable.

d. Home Equity Loan or Cashout Refinance

You get a home equity loan or do a cashout refinance and use the funds to maintain the home. However, you will have to pay back the loan over time.

e. Finding Another Partner

Since you are no longer in your current relationship, finding a new partner is an obvious choice. Both you and your new partner can live in the current house and they can help out with the home expenses or both of you can move into an entirely new home and use the rent from the current house to pay your share.


If it is obvious that you cannot afford to keep the house, do not cling to it. It is better to sell it and take the money than to get foreclosed. If your house value is lower than what you paid for it, the bank will not refinance it regardless of how good your credit score is. At that point, it would be prudent to sell it regardless of the losses. This will save your credit can you can buy another property.


3. You must know your assets

Usually during the divorce one spouse attempts to hide some of the assets by getting rid of all the paperwork or transferring funds/assets to family and friends. Before, during, and after the divorce, you should know exactly what you own. Courts require both parties to submit their asset list during the divorce. This includes the value of each asset and who owns what percent of it. After a divorce you should have the list of the following:


  • Business Value (if any)
  • Cash and Jewelry Value
  • Cash Value of Life Insurance
  • Real Estate Value
  • Retirement Assets


If your ex has bought a life insurance policy with your children as beneficiaries, then you need to make sure that he doesn't change the beneficiaries to someone else after the divorce including their new partner.


You also need to know the after-tax value of all the assets you own. For example, if your house is worth $500K with $200K in equity and you decide to sell it, after paying any outstanding loans and taxes what would be your take home. Similarly, at what rate your 401k or IRA plans will be taxed when you split them with your ex. You should also know any penalties that you will need to pay for early withdrawals. 


4. What about Social Security and Pension Plan

Any pension plans will be divided equally at the time of divorce. Depending on the plan and the agreement between the spouses, either cash can be taken out at the time of the settlement or upon retirement. In either case, it will be taxable. Both partners will be able to collect their social security benefits upon retirement.


5. Re-Build your credit

Most likely after divorce the credit score of both of the spouses will take a hit. It can increase their borrowing rates and insurance premiums. By getting a new no fee or low fee credit card you can rebuild your credit in a few months. However, your loan rates and insurance premiums won't' drop automatically. You will have to reapply for them or find entirely new providers to get lower rates.


6. Invest and Save Regularly

You should invest and save regularly after divorce. Go for a marathon instead of a sprint. Any expense you need to make, question it twice before moving forward.


7. Gain New Skills

While it may be difficult with children, you should try gaining new skills to increase your income. Several online sites such as Coursera, edX, and Udemy offer courses and certifications at a very low cost. Several large corporations also provide free training so that you can start your own consulting business for their products.  You may be able to qualify for federal financial aid or a single parent scholarship.

Related: 529 College Savings Plan

8. Join the Gig Economy

You can also increase your income by becoming a gig worker for companies such as Doordash, Lyft, and Uber. If you have technical skills Fiverr, Odesk or Toptal may be a good place for you to earn extra income.


9. Do Not Bailout your Ex

Regardless of how bad things are for them, do not entangle yourself in your ex's financial mess. Your life except your shared kids and money are separate now. By extending financial help you will set yourself up for being taken advantage of. If your ex cannot pay child support, Child Protective Services need to be aware of that.  


10. Hire a CPA / Financial Advisor

A certified account or financial advisor can help you turn your finances around and set you up for long-term financial success. Your family and friends can recommend you one, or you can find one online. Government and industry websites have a list of accredited professionals who are licensed to help you in your state. 


11. Use Social Programs 

If needed don't hesitate to ask for help at your local social services or welfare office.  There is are several progams that can be helpful.  There might be also some programs offered by a local non-profit or religious establishment.


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Filing taxes after a divorce

Warning:  This post is neither financial, health, legal, or personal advice nor a substitute for the advice offered by a professional. These are serious matters, and the help of a professional is recommended as it can impact your future.

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