There’s no way around it. We have to change our mindset regarding money after we divorce.
How does the income that ran one house now run two? It does not, and this is a fact that must be accepted. Life after divorce is financially demanding. Most research shows that a person needs more than a 30% increase in their income on average to maintain the same standard of living. About one in five women fall into poverty, and three of four parents do not receive child support in full on a regular basis. A man’s standard of living goes down on average 10% to 40%.
Here are two things that need to done so you can avoid the financial problems many face after a divorce.
Accept the Reality of the Reduction in Income!
Many people are not prepared or willing to accept the reduction in lifestyle. That is part of the reason that divorce and bankruptcy are often linked. To avoid the debts turning into an unmanageable situation, accept this reduction in lifestyle. This is time to create a new budget and stick to it.
While going through a divorce, many times things are decided with emotions involved, and not much economic sense. An example is one spouse fights to keep the home for sentimental reasons, but soon realizes maintain it is impossible. The equity in the home will not pay the bills and in today’s market, many times it cannot be sold for a reasonable amount, and selling often takes a very long time. Dave Ramsey is typical in his recommendation that your housing cost should be no more than 25% of your take-home pay.
Take time, change your entire budget and adjust your style of living accordingly. This may also be the time to consider looking for a new job with a higher income.
Develop a Financial Plan for Your Future!
You may have never handled any of the finances while you were married. It is time to get your head out of the sand and educate yourself with classes, books or online resources. Take the skills you have learned and sit down and make a financial plan. Where do you want to be in one year, five years, and ten years?
We all feel good when we accomplish a goal. Celebrating the short term goals will help keep you on track. Set up your long-term goals regarding things like retirement and college for the kids.
Now, focus on things like reducing spending and finding ways to increase your income. While growing up, my father would always tell me “You cannot beat the system, but you can win at the game. The game is to keep more of YOUR money in YOUR pocket.” Every year I get my budget and bills then review them closely to see where I can save money.
This year I cancelled cable, got a Roku and started streaming along with my TV antenna. I enjoy all my shows, and it saves almost $100 a month. During my divorce, I sold things on Amazon. It was an extraordinarily good way to supplement my income.
After the financial plan is made, get an expert, not the family friend who is good with numbers. Find a reputable accountant or financial planner who can review your finances and spending. They can give information on your plan and may be able to find additional ideas to help you achieve your goals.
This post originally appeared on Divorced and Scared No More!
Photo by Images of Money