Blog

By Bart Zandbergen, CFP®

Navigating the rough road of divorce can be a strain, physically, emotionally and financially. From a financial standpoint, it can be especially stressful if you were not involved in the financial decision-making during your marriage or didn’t have a good understanding of your financial situation as a couple.

If your divorce is complete, it’s time to start rebuilding your financial house piece by piece. For some, this can be a scary situation, but you can be confident in your ability do it, albeit with some professional help!

Let’s address how you might go about getting your financial fresh start after divorce.

First, you’ll need to an inventory of your current financial situation. Detail out your assets, income and expenses, and create a budget. A budget is essential when you start life on your own, especially if you were not the spouse managing the money when you were married.

Also in this step, I would encourage you to write out your financial goals and future plans. Do you have any big expenditures coming up in the near future? When do you want to retire? What would you like your retirement to look like? These are all questions that are good to think about as you start to address your financial situation and plan for the future.

Next, find a financial planner or wealth advisor to help you map out a financial plan; I recommend a Certified Financial Planner™ (CFP®). CFPs have completed extensive training as well as met experience requirements and are held to rigorous ethical standards. They understand the complexities of the changing financial climate and know how to make recommendations in your best interest.

This step is critically important if you have received a lump sum of money from your divorce settlement. Before spending any of that, I highly recommend you find a trusted CFP® to help you create a plan for your money.

A CFP® will also help you create a path to retirement.Many people find themselves having to reset their retirement date or modify their retirement plan after divorce. A CFP® will help you address important retirement issues from your divorce, such as:

• Whether you’re eligible for spousal social security benefits, and if so, when you can file for them.
• If you have a qualified domestic relations order (QDRO), how that works and what it means to you.
• How to manage any joint assets you continue to hold with your ex after divorce.

There are some additional topics you will want to discuss with your financial advisor as well:

• If you have debt, you will need a plan to pay it off and bring it zero as soon as possible. If you are still investing and are carrying debt as well, your advisor might recommend putting your investing on hold until your debt is payed off. Make sure your advisor knows about your total amount of debt.
• A plan to rebuild your savings, if they have been depleted. A good rule of thumb is to have 3-6 months’ worth of expenses in an easily accessible savings account.
• Your tax situation
• The best types of funds and ETFs for your retirement portfolio moving forward
• An investment plan tailored for your specific personal situation

I know this can all sound daunting and overwhelming if you were not involved in managing your investments and finances during your marriage. One of the best pieces of advice I can give is to start the process immediately after divorce. I have seen many individuals make the mistake of burying their head in the sand because it hurts too much to think about, or they wait until the alimony and child support run out and reality hits.

The first few years after your divorce are transitional ones, so gather your strength and address your financial situation head-on. Though difficult, you will find yourself and your family on a better path to the future, full of excitement and hopes and dreams.