You survived the divorce. Now comes the hard part: Getting your new single life on track, especially when it comes to finances. In many cases, the ex-wife has more post-divorce financial work to do.
True, some women make more money than their husbands, but they are generally exceptions. And true, the ex-husband usually contributes to two households, his new single one as well as the one maintained by his ex-wife, who typically is the custodial parent of their children.
But the harsh reality of divorce is that is that the lower wage earner usually suffers the most financially. And that lower wage earner usually is the woman, who left the workforce to care for children and, when she resumed her job, probably earned less. Even then, though, it’s possible to get your post-divorce finances in order and ultimately prosper. The following tips and strategies will help. And much of the advice applies regardless of your gender.
1. Get involved.
It’s the 21st century, but family finances aren't equal for many reasons. Carol Arnott, a certified divorce financial analyst with Greenville Financial Group, LLC in Greenville, Del., cites a recent survey of married couples that found the men more likely to be in charge of investments, insurance and retirement planning. The women, meanwhile, focused on day-to-day budgeting and bill paying. In short, the men were more strategic with money. So it’s no surprise that most of Arnott’s clients are women. And she’s not shy in encouraging them to seek professional financial help “prior to filing or as soon as they’re served with papers.”
The first step in mastering your money is understanding it. To do that, you need to look completely and carefully at where you stand. “Start with gathering the information,” says Arnott. “For many women, it’s the first time they are looking at many of these statements.”
2. Carve out your own credit.
Several of those statements are going to be for revolving credit accounts, such as credit cards. “One of the things that everyone needs to do is check their credit report,” says Sheryl Garrett, a certified financial planner and founder of Garrett Financial Planning, Inc. in Shawnee Mission, Kan. “Most times, couples, especially long time couples have had credit in joint names. If don’t have separate credit, you need to establish separate credit. This can affect men just as easily as women.”
Under federal law, every credit customer is entitled to receive one free credit report every 12 months from each of the national consumer credit reporting companies -- Equifax, Experian and TransUnion. You can request the reports online at www.annualcreditreport.com/, by toll-free phone call to 1-877-322-8228 or by mailing a request to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, Ga. 30348.
During your divorce, accounts should have been separated and decisions made about which party is responsible for what debts. Arnott notes that by the credit reports will enable you to see if your name is erroneously on any accounts. If so, it’s imperative to get your name off any debt for which you’re no longer responsible.
According to the Federal Trade Commission, federal law does not allow a creditor to close a joint account because of a change in marital status, but the creditor can do so at the request of either spouse. Once the credit accounts are separated, you might find you have no or very little credit history in your own name. So you need to rectify that as soon as possible. But be aware it’s not necessarily a simple process.
Again from the FTC: A creditor does not have to change joint accounts to individual accounts. The creditor can require you to reapply for credit on an individual basis and then, based on your new application, extend or deny you credit.
When you do get your individual credit account, the key for a newly divorced person dealing with new financial challenges is to use that credit wisely. “It’s difficult; we all carry debt,” says Arnott. “But credit cards aren’t the solution to financial planning needs. The can get you over a short-term hurdle, but if you’re not careful you will dig yourself into a deeper hole.” To avoid making that mistake, it's time to create a budget.
3. Establish a realistic budget.
Ah yes, the “B” word. It’s terrifying even in the best of circumstances. But post-divorce, it’s critical to overcome fear of it. “Although you're familiar with budgeting, post divorce things change,” says Arnott, even when both parties have negotiated an equitable settlement. And for some, she says, “It’s hard to acknowledge that your lifestyle will change.You had one household to support, but now there are two. “I’ve had women who feel entitled to maintain the same level -- pedicures, manicures, wardrobe, hair -- they enjoyed when married.”
In the cases where expectations are more reasonable, the problem is the process itself. “It’s the first time they have done some budget planning,” says Arnott. “They know the general bills will come and have been paying them, but that’s hindsight.You need to look ahead or you’re going to crash.
