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financially blindsided

Divorce Is Difficult Enough Without Being Financially Blindsided

financially blindsided

 

This probably comes as no great shock, but divorce can be expensive.

There are attorney’s fees, court costs, child support, alimony, and any number of additional expenses. For the most part, these are all obvious, expected parts of the process.

You likely anticipate these expenditures and more. Still, there are a number of less apparent costs to divorce, things that can seemingly come out of nowhere and financially blindside you.

Ending your marriage can have a huge impact on your financial future and your long-term economic well-being may hang in the balance. Here are a few pitfalls to look out for and a few ways to safeguard your interests.

Divorce Is Difficult Enough Without Being Financially Blindsided

Tax Changes

Not only will your filing status change drastically after a divorce—you’re no longer married, after all, hence, you can no longer file as a couple—but there are other tax factors to take into account. The division of property can have a substantial and unexpected impact in this area.

Capital gains taxes can come into play following your divorce settlement and may show up anywhere from real estate transactions to investments and beyond. At the same time, not all property is created equal in this regard, and various assets may be treated differently.

For example, the sale of a principal residence may not necessarily be taxed depending on how much gain exists—there’s a cap gain fee for individuals as well as couples, which varies from state to state. On the other hand, if you withdraw money from a retirement fund like an IRA, 401k, or pension, you may be taxed the full rate.

Credit Surprises

Another realm that often flies under the radar in divorce is how it can impact your credit. Once your marriage is dissolved, your ex’s financial doings cease to have any impact on yours. Both parties will apply for credit cards, loans, and the like as individuals, and you will be your own economic entity. That’s fantastic, but depending on the situation, your former spouse can still influence your wallet.

Getting a divorce doesn’t automatically change any pre-existing agreements you and your ex entered into as a couple. If you have a mortgage, a car loan, or amassed any shared debt during your marriage, you’re still on the hook for that.

Ideally, these concerns will be addressed in your divorce settlement. The court may order one of you to pay a joint debt, and in a perfect world, that’s precisely what will happen. But as you’re probably well aware, we don’t live in a perfect world. If your spouse is ordered to take care of a debt with your name attached but doesn’t, it can negatively impact your credit and you may even wind up in collections.

The final agreement—whether it’s an arrangement you and your ex arrived at together or one that was handed down by the court—can include provisions for this type of situation. Your former spouse may be ordered to refinance a particular loan in his or her name alone by a specific date. Still, it never hurts to keep an eye out and make sure that this actually happens.

Changes In Living Situation

This probably sounds obvious, but you may be surprised how often people fail to account for the expense of finding a new place to sleep. Odds are very good that, by the time your divorce is finalized, you’ll already be living apart. Frequently these accommodations are transitory in nature and acquired in haste.

Moving forward, you may well want to set down more permanent roots, which can incur costs. This will vary depending on if you rent or buy, but there are deposits, down payments, and a bevy of other outlays to consider. Buying furniture and a new set of kitchenware can be pricey.

Even if you remain in the marital home, you may be faced with covering all of the bills from a single paycheck for the first time. If a suitable agreement can’t be reached, you may wind up selling a shared house. In these situations, assets may be sold quickly and with a mind for convenience rather than for optimal value.

Gaps In Health Insurance

Health insurance is not only important, you know, for your continued health and well-being in the face of illness and injury, but as it is now mandatory, you can incur substantial tax penalties if you are uncovered. If you were previously shielded under your spouse’s plan, after divorce you may be open to fines, or have to pay out of pocket for any medical care.

If you don’t have coverage through an employer, it’s possible to continue hanging onto your ex’s plan through COBRA for up to 36 months, though that can be expensive. You can also look into getting less expensive health insurance through the Affordable Care Act in your state. If this is your situation and you know that it’s coming, you may want to examine your options ahead of time and get everything sorted out by the time the final agreement is signed.

Guard Against Surprise Expenses

While these and other costs may blindside you during and after the divorce process, there are ways to safeguard your pocketbook and ensure you start the next phase of your life on sound financial footing.

One of the biggest missteps many people make in divorce is not budgeting. It’s way too easy to lose track of your expenses as they mount, and far too few people take the time and effort to set out a specific plan. And then you have to stick to this roadmap, which is a whole other hurdle.

Overestimating what you have and underestimating what you spend are common problems. When you pay for an attorney, shell out for court costs, cover the upkeep on your home, or even pay child and spousal support, it adds up quickly. Setting and adhering to a budget may be a pain initially, but it will serve you well in the long run.

You may also be leaving valuable assets on the table during the division of property. While some resources are easy to put a price tag on, like bank accounts or loan debt, others can be trickier. A car or house may be worth a specific dollar amount on paper, but when it comes to liquidating them, you may not always be able to get that much.

People also overvalue items that have emotional significance. How important these possessions are to us may not reflect a real-world value, and you run a couple of risks in these situations. First, you may spend a great amount of time arguing back and forth over an asset with relatively little monetary value. Second, you may agree to a less optimal settlement that doesn’t provide as much financial stability.

Before you sign any documents, take a step back, look at everything, and determine how much it’s all worth to you and where you’re willing to compromise.

Shared assets are divided up between the two spouses, but the court can only allocate what they know about. Hopefully, both parties are honest and trustworthy enough to be upfront when it comes to declaring property, but that may not always be the case. Remember what we said earlier about this being an imperfect world.

If hidden assets are not divulged, it can impact the settlement, but there are ways to search for clandestine holdings. You can check recent tax records for inconsistencies, look at bank accounts for expenditures you didn’t know about, examine brokerage statements for stocks and bonds, and more.

Make sure your financial records are up to date and organized. Know what you have, what your spouse has, where money is owed, and gather as much information as you can. Not only will this streamline your side of the equation, but it will also make it easier to spot any irregularities from your spouse.

These are just a few possible pitfalls that can swallow up your finances and put a serious hurting on your financial status as you move forward with your life. Divorce is difficult, and it is an emotional time where you juggle any number of issues. Things can fall through the cracks if you’re not paying attention, and it will be in your best interest to be as focused and detail-oriented as possible. Your financial future may depend on your vigilance.

The post Divorce Is Difficult Enough Without Being Financially Blindsided appeared first on Divorced Moms.

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financially stable after divorce

How To Become Financially Stable After Divorce

financially stable after divorce

 

Understandably, many people fear the potential financial repercussions of getting a divorce. After ending a marriage, it’s not uncommon for a person to experience a significant loss of income and property. Fortunately, there are some ways to recover financially.

Becoming Financially Stable After Divorce

Live Within Your Means

A divorce may ultimately force you to temporarily adjust your budget. It’s definitely in your best interest to hold off on making any big purchases. Simple lifestyle changes, such as dining out less often, will help save a lot of extra money. Although the idea of cutting back might be an adjustment, but you will be able to get back on your feet soon.

Consider Getting a Roommate

Living alone has its benefits, but depending on where you are living, it might not be feasible. Try to find a roommate to help out with the bills. You’ll be surprised how much extra cash will be saved every month. If you don’t already own a home, consider renting an apartment with a responsible friend or family member. A one-year lease agreement should give you enough time to improve your financial status, though you should tailor any agreement to your unique situation.

Raise Spousal Support Payments You Receive

You can talk to an alimony lawyer to make a case if you feel you are not getting your fair share of spousal support. Doing so might help you receive more money from your ex. It just depends on the specific circumstances of your divorce.

Earn Extra Money

There are plenty of methods to earn extra money. For instance, you can start donating plasma every week. It’s an easy way to bring in an extra $400 per month. The process of giving plasma typically only takes around 45 minutes. In addition to the peace of mind that can come from cleaning out your stuff, you can earn a little bit of extra cash by selling items. Hosting a yard sale, selling items on Craigslist or eBay, or even just posting old clothes, books, or anything else on Instagram or Facebook Marketplace can be a good way of cleaning up and making some money while doing so.

Rebuild Your Confidence

In order to accomplish anything worthwhile in life, you must have a certain level of confidence. Doing some of the small things above can help you feel more in control. Thinking through everything you have to do is overwhelming; it can be helpful to write out each individual step and take things as they come. It can feel difficult to work through what life will be like alone. However, never stop believing in yourself. This is the perfect time for you to set new goals.

A large setback like a divorce can cause more than a few problems financially, but getting the support you need from family and friends, as well as working every day to cultivate confidence in yourself can push you through. Remember that you are a whole person, worth supporting and loving.

Overcoming a divorce is not a simple task. Nevertheless, continuing to push through the turmoil will help you to succeed. Financial loss is something you can survive. If you made it through a messy divorce, you can make it through the aftermath. Just take things one step at a time, believe in yourself, and take practical steps to ensure your financial stability.

The post How To Become Financially Stable After Divorce appeared first on Divorced Moms.

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survive financially as a single mom

3 Ways Single Moms Can Survive Financially

survive financially as a single mom

In the end, there are really only two things to focus on if you want to survive financially as a single mom: decreasing expenses and increasing income. The more you do both of those things, the better off you’ll be.

 

Whether you’ve always managed the household checkbook or this is your first time, the financial struggles of being a single mom can feel overwhelming. Stop, breath, and start with these simple steps to getting your finances under control.

3 Tips For Surviving Financially As a Single Mom

1. Stop incurring new debt.  If you’re in the red hole, the first step is to simply stop digging deeper. It’s just not possible to get out of debt if you keep creating more. It might be easier for a while to just stop using credit cards in order to not incur any new debt. Every day that you don’t add to your debt is another day closer to seeing the light at the end of the tunnel. If you find that you can’t get to the end of the month without incurring debt, Step 2 below will help.

2. Budget every dollar. I know, it’s a dirty word to many, but I turned my financial life around when I got serious about budgeting. One of the reasons we find ourselves out of control financially is because we don’t have clarity on what goes in and what goes out. Even if you think you know, you never really do until you track your income and expenses and account for every dollar. Mint is a free app that can help, but I find YNAB to be worth every penny (plus, you get a free month trial to then budget how to pay for the app).

If apps don’t appeal, there’s always pen and paper, an Excel spreadsheet, or even a Word doc to get you started. You can round up to the nearest dollar, but you may be surprised on just where those dollars have been going! It will help you figure out where you really can cut back, and where you can’t. YNAB uses the zero-based budgeting method (this method can be used with or without the program) and the concept is, you can only budget the dollars you have. If you’ve been budgeting by assuming your income and expenses, it will take some adjustment to get used to this new method, but it will be well worth it to get you on a more solid financial footing.

3. Beware the Single Mom Guilt.  I have been there. I have felt so guilty about my marital status that I’ve spent more than I could afford, trying to overcompensate. But after using my tax refund to pay off credit card debt, and then building up debt, and then paying it off, and then doing it again, I finally had enough. And I realized that throwing money at the problem wasn’t really helping.

The more financially stable we became, the less stressed I was. The less stressed I was, the happier my girls were. The happier my girls were, the more we could simply enjoy being together and not have to spend so much money on cable, on outings, on activities they weren’t really enjoying. Instead, my oldest daughter helped out at the dance studio to get a break on tuition.

My youngest daughter shops at Goodwill when she needs new leggings. We come up with solutions together when we hit financial blocks. And if you feel bad for saying, I can’t afford it, try saying, “sorry, that’s not in our budget right now” instead. A small difference, sure, but it takes the focus off the negative part, and reminds both you and your child that you have financial goals.

Of course, personal finance is always personal, and you will have to make some difficult decisions, but try to remember, that’s true for most of us! Divorced or not, kids or not, we all can only work with what we actually have. And you may find that there simply isn’t enough. If things are that tight, you may need to look into increasing your income.

I ended up going back to school once it became clear to me that I was never going to make it on my salary as an Assistant. So I went back to school, got my Paralegal certificate, and got promoted. I took out some student loans and was able to get reimbursed through my employer’s educational assistance program for some of it. Thankfully, my interest rate on my student loan is low, but I am currently throwing any and all “extra” money into paying that off. So far, I’m paid a year ahead.

If going back to school is not an option, consider freelancing. Please do NOT pay for any “work from home” opportunities. But there are things like ride-sharing services, babysitting, and e-commerce sites. I have a friend who has done very well with her Etsy shop!

In the end, there are really only two things to focus on when it comes to managing your money: decreasing expenses and increasing income. The more you do both of those things, the better off you’ll be.

Our family has gone from surviving to thriving, and I can trace it back almost to the day that I was absolutely done with the paycheck-to-paycheck struggle. I am now a month ahead financially, and having that breathing room definitely, helps when we get hit with a new financial problem.

I am out of credit card debt completely, and we even went to New York this spring to see Hamilton, all completely paid for in cash. (I do use credit cards again, but only for the rewards, and I have auto pay set up to pay the balance in full every month so that I don’t pay any interest.)

It’s true that money doesn’t buy happiness. It’s also true that money can’t buy the previous, married, 2-parent household, either.

It’s also our job to teach our children about personal finance. As with everything else, they will learn these lessons by our actions, and not our words. If you want your children to have a healthy relationship with money, it’s time to have your own healthy relationship with it, too.

You’ve totally got this!

The post 3 Ways Single Moms Can Survive Financially appeared first on Divorced Moms.

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become financially smarter

4 Ways Divorced Moms Can Become Financially Smarter

become financially smarter

 

During my work with women who were going through or recovery from divorce one of the most frustrating aspects of the work was their attitude towards money. I’ll go out on a limb and say that one of the main stressors for women after divorce is money.

Yet, when asked what their plans were for relieving their stress over money, the majority didn’t make that a priority in life.

I worked with clients who had been long-term stay-home-moms, their only financial plan for the future was to live on child support and alimony. They were doing without; their children were doing without and the main concern for these women was not having to make a change in their role as a stay-at-home mom.

They feared working or building a career for themselves would be too disruptive for their children without acknowledging how being stressed for money was damaging their children. The only role money took in their lives was the lack of money.

When asked what their plans were for when their children reached the age of majority and child support stopped or, alimony was no longer coming in, I got shoulder shrugs in return or, “I’ll figure it out.”

Sorry, but the time to figure it out isn’t then when you have even less money than you have now.

A recent Prudential study on the “Financial Experience & Behaviors Among Women” shows, unfortunately, that women have not come a long way when it comes to money. Women feel no more prepared to make smarter financial decisions today than they did three years ago — or even a decade ago.

And, based on my experience with divorcing clients they’re not prepared to make smart financial decisions when smacked in the face with divorce and the possibility of living in poverty.

Divorce doesn’t mean remaining financially dependent on a man you are no longer married to. Divorce not only legally ends your relationship with your husband, but it also sets a woman free to make her own way in the world and, to do that she must be able to make her own money and smarter financial plans for herself now and down the road.

If you’re divorced and reluctant to go back to work or, fear what the future holds for you financially here are 4 tips to help you become financially smarter.

Get educated: Learning about money is important, and the more of a role you take, the more enjoyable it becomes. You may consider taking a few classes in finances at a local college, university or online.

This might be a little extreme but, I can guarantee that you will be better off if you start to get a handle on your finances. There are hundreds of books, podcast, blogs, and videos that can help you gain a better understanding of your personal finances. We can’t “stay dumb” about money. It limits our options in the world, not to mention feelings of self-worth and competency.

Track and budget: In order to make smart decisions about your money, you have to understand where your money is going. Start by tracking your expenses for one to two months. Once you see where your money is going, you can start to weed out the unnecessary expenses. Use this information to create a budget that reflects your needs instead of your wants.

To help make tracking and budgeting easier, you can download smartphone or tablet apps such as Mint, GoodBudget, and Expensify. Creating and keeping your budget is one of the simplest ways to not only learn about your finances and spending habits but to be more informed and involved so that you can make smart decisions about money.

Start saving now: Retirement might seem like an eternity away, especially for women in their 20s, 30s and even 40s, but saving for it is incredibly important for financial security. The earlier you start saving for retirement, the better your financial picture will look in the future.

If you work and your company offers a 401(k) plan or 403(b), make sure you contribute as much as you can. This is especially important if they offer to match your contribution. Remember, this is essentially free money going into your retirement account. If your company doesn’t offer a 401(k) or 403(b), consider opening a traditional or Roth IRA. The sooner you start saving, the longer you are allowing your money to grow.

Get a job: Unless you’re wealthy or a movie star, your economic level will decrease as a result of divorce. The same income that used to run one household is now running two. You’re going to need to supplement the income from child support and alimony with earnings of your own.

If you worked in the past, re-enter your career field. If you don’t have a work history but skills that make you marketable, make a list of those skills, build a killer resume and start networking. If you have no marketable skills, it’s time to get a degree or take courses that will help you become more marketable in today’s job force.

Women can be very smart with money. All we need to do is start getting in the game and stop believing that financial issues are too complicated for us to understand.

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