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4 Ways to Financially Recover from a Divorce

October 21, 2019
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If you or someone you know has recently been through a divorce, this article will be an important read. Today we are going to look at 4 ways to recover financially from a divorce.

1) Control the things you can control

The reason we call ourselves “Summit” Wealth Group is because there are so many parallels between hiking to the top of a mountain and our financial journey. In this case, as you seek to reach the summit of your financial journey, focus on controlling the things you can control. We share this advice with all of our clients.

When you are trying to reach the summit of a mountain, you can’t control the elements, you can’t control the wind, the rain, the terrain, the level of difficulty. What you can control is your physical fitness. You can control the supplies you bring to overcome the challenges you might face. You can control your strength and endurance.

Similarly, when you are going through a divorce, you can’t control what the court decides. You can’t control the fact that you will lose assets and potentially income. What you can control is your discretionary spending habits. You can prepare for potential headwinds by building an emergency fund for yourself to prepare for unexpected changes.

2) Focus on your next 6 months of living

Your lifestyle will look very different after a divorce. You go from two incomes to one. Your housing situation might change. You are now the sole provider for yourself so it is time to first look out for number one. Focus on the essentials. You owe it to your mental and emotional state to simply set a budget for how to get through the next 6 months.

Don’t plan any extravagant spending. Hold off on a home or auto purchase, hold off on any big travel plans. Spend the next 6 months learning yourself in the new life you are living. Then once the dust settles, you'll have the confidence to move forward with tackling bigger financial goals.

3) Set up a budget

Now that income and expenses have drastically changed, set up your new budget. This includes taking a brief inventory of what is yours. What are your assets and debts as you enter into this new you? What will you be responsible for paying for and how will you do so? Simply list your income and monthly expenses. Use tools such as Mint.com to track your spending by category so you can see how much you’re spending on items such as dining out, groceries, utilities, etc. Balancing your budget is probably the most critical thing you can do financially following a divorce.

4) Rethink your financial goals

Now that you are no longer sharing financial goals with someone else, it is time to rethink your own priorities. What brings YOU fulfillment and happiness.  What do you hope to accomplish financially over the next year? What about the next 5 years?

Having a purpose and a drive towards a financial goal prevents you from spending frivolously and keeps you on track. After a divorce it is very important to do this as your individual goals are likely not the same as your joint goals once were.

As you begin your new life journey, be easy on yourself. It is easy to begin doing too much too soon. You have a mental and emotional journey to work through as well as a financial journey ahead of you. Keep it simple and as stress free as possible while you stay focused on what is important to you and the values you hold.