Just when you think the worst is over, and you’ve made it through the emotions, the fatigue, the fear, the anxiety of the divorce process and you are finally on the other side, you realize that you now have to manage your finances on your own and they look VERY different than they did when you were married!
Where do you even start to sort it all out? Can you afford to go to the movies this weekend? You’re not even sure. Unfortunately, the most common reaction to this situation is the old ostrich routine. “If I just pretend everything is ok, then it will be!” Yeah……. Not so much.
So where do you start? Let me give you the first 5 things to help you conquer the money demons and begin the next phase of your life with confidence and control.
1. Start a Budget
Even if you had a budget when you were married, toss it out. You need a new one reflective of your new reality. Don’t get freaked out by the word “budget”. I know that when you hear it you think “diet for my money” and that’s not the case! A budget is the one and only way you can shift from unconscious spending to conscious choices that will lead to the outcomes you want. So instead of “diet” think “business plan”. That’s right, a budget is a “Business Plan for Money” that will guide you to financial success! There, now isn’t that better? By the way, a budget is just a list of income and expenses and savings goals. There are TONS of budget tools online and a good financial advisor will be happy to help you get it set up.
2. Review Your Divorce Decree Thoroughly
One of the services I provide is post-divorce transition assistance and the first thing we do is go through the decree with a fine-tooth comb. I have been STUNNED to discover that in about 75% of cases, there are assets that the client is entitled to that haven’t been transferred and they didn’t even realize they were supposed to get! Once your attorneys are done with your case and have the final judgment, they pretty much disappear leaving you to do all the tactical work of actually moving the assets around. If you don’t understand the legalese of your divorce decree, be sure you have an attorney or financial professional review it with you.
3. Create a Filing System
If you don’t have one yet, now’s the time to create a filing system next to the computer that you typically will use for your online banking, budgeting, etc. I’m a fan of old-fashion paper files so I still keep most of my stuff that way but I am starting to convert over to electronic. My best advice for you is if you choose to go electronic, either a portable hard drive or cloud folder like Dropbox or Google Drive is essential! You don’t want to wake up one day to a crashed computer and all your files are gone! People tell me that they worry about the security of these options. You know what, it’s as secure as it’s going to get and I choose not to dwell on it and pay for an identity protection service.
4. Pay Yourself First
This is the most important step to securing your financial future. There is one simple thing that always separates the wealthy from the not so wealthy. ALL wealthy people live beneath their means – spend less than they make. It’s a simple concept really but in the US we are such a culture of instant gratification and easy credit that we breed poor money habits like mosquitos in Mississippi. It doesn’t matter how much you make, the first 10% goes to pay yourself – period. If you just can’t see how that could be possible, sit down with your financial advisor and discuss some choices. I promise you, it’s possible.
5. Hire an Advisor You Can Trust
Even if you don’t have a ton of assets, you need to hire an expert to help you with your planning and management. The money you spend will come back to you tenfold. Even if you have financial experience and investing knowledge, if it’s not your priority, you’ll tend to ignore your investments when changes should be made and chances are you won’t have a clear plan that you monitor annually either. Trust me, find that partner you can trust. Interview them carefully and make sure you know EXACTLY how much you’re paying in fees. You should NEVER pay total fees over 1.5%.
Hopefully these tips will get you started. Take some deliberate action in each of those areas and you’ll be well on your way to financial independence. You can do it! It’s never too late to start today.