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Dealing with Divorce: Finances after Surviving Divorce

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Dealing with Divorce: Finances after Surviving Divorce

Coping with and surviving divorce can be an uphill battle for many.  Dealing with divorce is never easy and presents a myriad of challenges, some financial and some more personal in nature.  Creating a post-divorce personal finance action plan can be a great move to get your personal finances back on track.

Finances after Surviving Divorce

Below are some of the areas that should be addressed in such a post-divorce personal finance plan, all of which are addressed in detail in my personal finance e-lessons that you receive free when you subscribe to Personal Finance Insider.


Creating a post-divorce budget can help in a number of different ways:

  • You may be accustomed to living off of two incomes.
  • Some divorcees feel guilty about putting their children through a divorce, so they try and make up for it through gifts and vacations.
  • Some divorced persons feel a need to look more attractive and feel better after a divorce and end up overspending on themselves.

Creating a budget can help you live within your means and achieve your financial goals even after going through a divorce.

If you are having trouble making ends meet, try and find additional ways to save money or make more moneyThere are some incredibly easy yet effective ways to put more money in your pocket.

Financial Recordkeeping

It’s important that you keep good financial records, especially after a divorce, when so many components of your personal financial plan are in a state of flux.

You may have the greatest post-divorce financial plan in the world, but if your financial records are not organized, it will likely be difficult to follow.

Creating a financial recordkeeping system may take a few hours to set up and organize, but it’s well worth the time.

Estate Planning

There are a number of important estate planning matters to consider after a divorce.

Reviewing one’s estate planning documents, such as a will, trust, and medical directive is very important.  It’s also important to update beneficiary designations to ensure they properly reflect your wishes.

It’s not uncommon for decedents to inadvertently leave property to a divorced spouse when such documents and designations are not carefully reviewed and updated.

Investing and Retirement Planning

Saving and investing appropriately is always important but especially after going through a divorce.  Many people are set back financially by a divorce.  Since most of us can likely expect to be retired for 25-30 years, it is crucial to do some serious retirement planning.  For example, you should probably analyze the following:

  • How much do you currently have saved
  • How much do you need at retirement to have the retirement lifestyle you desire
  • How much do you need to be saving in order to cover the shortfall
  • Past investment performance
  • Projected growth rate of investments
  • Appropriate investment strategies given your age, risk tolerance, personal situation, goals, and other important factors.
  • What can you expect to receive from Social Security and Medicare?
  • Are you using appropriate investment vehicles given your circumstances and needs, such as an IRA or brokerage account?
  • Would an annuity be appropriate to help ensure against the risk of longevity?

If you project a retirement shortfall, find appropriate solutions to cover the shortfall, such as the following:

  • Find a new or second job or work more hours
  • Increase your savings
  • Postpone retirement
  • Use a phased out retirement approach
  • Find something you enjoy and work part time during retirement
  • Downsize to a smaller home


Divorce can bring about significant change to the property you own and the risks you face.  It is important to remain properly insured after a divorce.

Many people require a number of different insurance policies to responsibly hedge against the risk of financial calamity:

An analysis of your personal situation, the financial risks you face, and your current insurance policies can help determine whether new insurance policies or change in coverage is appropriate.

Food Storage and Emergency Preparedness

Regardless of whether you were prepared for an emergency before your divorce, make sure you are prepared for one after your divorce.  Create a proper food and water storage, emergency preparedness kit, and first aid kit.

Emergency Fund & Cash Management

Dividing property and paying legal fees depletes the emergency funds of many divorcees.  If necessary after a divorce, build up an appropriate emergency fund to protect you in the event a large expense or other financial emergency.

Ensure that your emergency fund (and other bank accounts) is kept in an account that is safe, liquid, and pays a decent rate of return, such as a high yield savings account or money market accountEven your checking account should be an interest bearing checking account so that your money is working hard for you.

Saving for Education

Helping children obtain a college education is a goal of many parents.  However, if finances are strained after a divorce, this may seem like an impossible goal to accomplish.

Fortunately, there are many ways to save for college that are easy to do and effective yet won’t ruin your finances.

Pay Off Debts & Managing Credit

If you are saddled with debt after a divorce, getting out of debt can provide a great boost to your finances.  Develop an appropriate plan to pay off any and all debts you may have:

If appropriate, see if you can refinance your mortgage to a lower interest rate.  Auto loan refinancing may be another way to lower your monthly payments and get out of debt quicker.

Additionally, make sure that you are using credit cards to your advantage not disadvantage.  Credit cards should be paying you, not vice-versa.

Check your FICO scores (credit scores used by most lenders) and pull your credit report to gauge your credit worthiness.  In order to qualify for the best rates, you generally need a credit score over 760.  If your credit score isn’t over 760, take the steps now to manage and improve your creditImproving your credit score can save you tens of thousands of dollars over your lifetime.

Tax Planning

As your personal situation changes after a divorce, so too will your taxes most likely.  Some of the common changes you may see include:

  • Change in filing status, such as from Married Filing Jointly to Single or Head of Household
  • Loss of a spousal and/or dependency exemptions
  • Loss of child tax credits
  • Loss of education credits
  • Change in marginal tax rate
  • Paying or receiving alimony

Tax planning strategies, such as bunching your deductions or planning to avoid the alternative minimum tax can help lower your tax liability.

Taxes can be much more complicated than normal in the year of divorce and the year after.  It may make sense to have a professional prepare these returns for you, even if you normally prepare them yourself.

Money and Marriage

Financial mismanagement and disagreements over money are some of the main causes of marital conflict and divorce.  Understanding a few important principles about managing money in a marriage can go a long way in helping a marriage currently on the rocks or improving future relationships.

Financial Assistance When Dealing with Divorce

With a little bit of time and effort, many people are capable of managing their finances on their own, even after a divorce.  However, if you want professional assistance, seek out an appropriate attorney or financial advisorDepending on the assistance you are seeking, you might seek out the services of a CPA, CFP, or CFA

Additional Information

For additional information, take a look at the following books:

What are your thoughts about dealing with divorce by creating a personal finance action plan?  After surviving divorce, what financial challenges did you experience?  Leave a comment below!

Image: Kurhan/Bigstock


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