As we move through the final stages of the pandemic, many couples are resuming their plans to end their marriage. Those plans have been paused during the pandemic, which explains why divorces are down in 2020.
When a heterosexual marriage ends, women still tend to experience an even greater decline in income, with household income dropping 41% while men’s income declining only 23%, according to research by the US Government Accountability Office. If you’re considering moving forward with a post-pandemic divorce, the list below is five critical steps all women should take to financially prepare for this stressful transition. As a financial advisor who has also experienced divorce, these steps helped me start my own transition.
1. Think and take action
Take some time to think about your situation so that you can move into the acceptance stage of realizing that your marriage is over. During this time, you should research and gather the team of professionals you will need, such as a marriage counselor, divorce attorney, financial advisor, and tax specialist. Having a team of such professionals will enable you to move forward in the next phase of your life. In addition to the above, I also started seeing a therapist, who helped me mentally face every step of the divorce process.
2. Open your own bank accounts
If you don’t already have checking and saving accounts in your name, it’s time to open them. You should start by automatically depositing your entire paycheck into your new accounts. During this time, you can only transfer money needed to contribute to household expenses until the divorce is over. This is the first step to getting into the habit of managing your money. I found this step to be crucial because I was able to regain control of my finances early on. The account opening process can also take a long time, so it is best to start as soon as possible.
3. Start building your credit
You may have joint credit card accounts. Now is the time to build your credit by getting a credit card in your name. This is also a good time to apply for a FICO credit score from all the credit bureaus so you know your credit worthiness when it comes to making large purchases, such as buying a home or a car. I am proud that I was able to buy my house while I still own a house jointly with my ex-wife. It was my salary history and credit score that gave approval.
As you know, attorney’s fees are charged on an hourly basis, which can add up to your divorce becoming final. Also, the expenses of moving or losing half of your items will require you to start over and buy back necessary items, such as furniture and kitchen equipment. Going through the divorce process is the time to get rid of every extra cent you have. Here are some tips on how to get started:
- Review your personal expenses and separate your needs from yours. Take a detailed inventory of your expenses. You may find that you spend too much on subscriptions or take too many trips to Starbucks. Doing so may help you find the extra cash you need during this transition.
- Turn your emergency fund into a divorce fund by providing tax refunds, bonuses, or any other discretionary income you may have. Designate a separate bank account for this fund – one without a debit card, so you are not tempted to use it. Watching this box grow can give you empowerment and motivation to keep going.
- Stop using the credit and switch to cash for your regular purchases. A low or zero balance may be required on your credit card when you begin your life on your own. As mentioned earlier, you will need to be in good credit standing to start your life as a single woman.
- Automate as much of your expenses as possible. My ex-wife paid the bills, so I never thought about her. As a single mom, I thought this was a daunting task, especially if the bills were due on different dates. I’ve learned that putting your expenses on autopilot keeps bills paid on time and gives you more time to yourself with less worry about missed payment deadlines and incurring late fees.
5. Exercise independence
During my divorce experience, I created a typical cash flow spreadsheet with details of income and expenses. For example, you did a research and estimate the total cost of renting or buying a home. Furthermore, I estimated the cost of utilities, groceries, cables, etc. while living on my own. This process helped me visualize what my new life would look like, while also enabling me to believe that I could live on my own again. Doing this helped me make sound financial decisions because I knew my budget limits.
Divorce can be one of the most stressful and draining experiences of your life. But once he’s behind you, he can also be incredibly liberating. It is important to prepare yourself mentally and emotionally for divorce, but preparing yourself financially is critical to your success and well-being. Believe me – your future self will look back and thank you for taking such good care of it.
Wealth Manager, Merit Financial Advisors
Renora Nelson is a wealth manager at Merit Financial Advisors, where she helps her clients plan and enjoy their retirement years. With over 15 years of experience in the financial industry, she holds a Bachelor’s degree in Accounting and holds Series 7, 63, 24 and 65 licenses. Renora has a 16-year-old son and lives in Georgia.