By Kate Kovats
April is Financial Literacy Month, and I have three simple money tips for those going through divorce or who are recently divorced.
Simple but important.
After all, some of you might be taking a more active role in your day-to-day personal finances and longer-term retirement finances for the first time ever or at least in a while. Plus, there’s the unfortunate matter that most people – and women more than men – experience a drop in income post-divorce. The financial implications can be long lasting, so the stakes are high. According to this Reuters article, divorced households have 30 percent less net worth than non-divorced households and are 7 percentage points more likely to not have enough money to last through retirement.
So, here are my three simple tips.
So simple, right? But you’d be surprised how many people at that first meeting with their divorce lawyer don’t know how much they earn, or their soon-to-be ex earns or about their other various income streams, including income from bonuses or investments.
Now is a time to take inventory. It doesn’t have to be fancy. You can use an app, but an Excel or Word document, or gosh, pen and paper will do. List out all that you know and that you don’t know but need to find out. If you are going through a divorce, you’re going to have to do this anyhow. If you are already on the other side of a divorce, hopefully you have a pretty good handle on this. But no matter what, it is important to stay on top of your finances. You need to know what you have coming in and going out, because you also need to…
Maybe you never had to pay attention to a budget. You spent and your spouse paid the bills. Or maybe you and your ex always meant to budget, knew it would be a good idea, but never got around to it. Now is the time. It’s all up to you now. Again, you don’t have to get fancy. Simply document how much you have coming in each month alongside your monthly obligations like mortgage, car payments, utilities, food and more. You also want to budget for fun stuff, splurges – because you do have to live a little – like vacations and dinners out with friends.
There are apps for this, as well. NerdWallet, my favorite personal finance website, lists Mint among its eights favorite budgeting apps.
Unless you yourself are a financial professional, chances are you will benefit from working with a professional. You need a financial planner or advisor who is looking out for you in the short term, day to day, and who also has an expert eye on the long run. What are some savings, investment or tax strategies you have never thought of? What are your insurance needs? What are your retirement goals – and how can you get on track to achieve them?
I particularly recommend working with financial professionals who are certified to serve the needs of those who are divorced or getting divorced. These professionals are called certified divorce financial analysts (CDFAs), and you can find them listed on the Institute for Divorce Financial Analysts website.
So, that’s it. Know your finances. Budget. Hire a professional. I’m keeping it simple, because you have to start somewhere, and the most important thing is to get started.