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It can be a headache, but doing these things will make your life easier in the long run.
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Many think of this time of year as tax season, and they’re not wrong. But for some couples, the beginning of a new year also brings separation or even divorce. A University of Washington study found that divorce rates begin climbing after the holidays and peak in March. Some may view this as a fresh start, but regardless, the process is often a major source of stress.
Divorce proceedings can take a long time, and there’s often a lot of legal red tape to cut through. Then, once it’s done, you face the daunting prospect of covering all your expenses on your own. While everyone should follow their lawyer’s advice when trying to navigate a divorce, here are a few tasks that can help to ease the financial transition.
1. Close joint bank accounts and open new ones
Once you and your ex have agreed on how to divide your existing savings, you should open new checking and savings accounts on your own. Transfer the funds accordingly and then close any old accounts you shared together. If you had automatic bill pay set up to take money out of your joint accounts, make sure you transfer these payments to your new account before closing the old one.
When shopping for a new bank account, think about the features that matter the most to you. If you want to earn a high rate of interest on your savings, you’ll need a high-yield savings account from an online bank. And if you don’t want to be tied to a local bank’s ATM network, you’ll have to find a checking account with a nationwide ATM network or one that provides monthly ATM fee reimbursements. Check out our guide on how to choose a bank to learn more about the key features you should consider.
2. Update your life insurance beneficiaries and estate plan
You probably don’t want your ex inheriting your life insurance policy if you die, so update your beneficiaries as soon as possible. You could name your children, other family members, or even a friend. Or if you don’t feel you need life insurance anymore, you could cancel the policy.
You may also want to change your will so your ex doesn’t inherit any of your property after your death. Depending on how complicated your will is, you may need a lawyer’s assistance to do this.
3. Create a new budget
Divorce means you’ll no longer be able to rely upon your ex’s income, unless they’re paying you alimony. Even then, that may not be enough to provide you with the lifestyle you’re used to. So it’s important to plan a new budget.
Think about how your income and expenses will change after your divorce. You might have less money coming in, but you also might have less going out since you won’t have to pay for your ex’s bills and purchases anymore.
If you’re struggling to keep track of your spending, a budgeting app could help. This can do a lot of the math for you and help you quickly visualize where your money is going each month.
4. Re-evaluate your emergency fund
Your emergency fund is money you use to cover unplanned expenses or to help you pay for your bills following a job loss or an injury that leaves you unable to work. Ideally, you want to have at least three months of living expenses in your emergency fund, but some feel more comfortable with six months of expenses saved or even more.
If you don’t have an emergency fund or you don’t believe yours is adequate, building this up should be your first priority after paying all your bills each month. Once you’ve done this, you can work toward saving for some of your long-term goals.
5. Check your credit
Your credit reports don’t keep track of your marital status, so getting a divorce doesn’t directly affect your credit. But closing joint accounts you shared with your ex can change your credit score. More importantly, if you forget to close any joint accounts, your ex’s financial behavior could continue to affect your credit long after your divorce.
Everyone is allowed free credit reports through AnnualCreditReport.com. During 2023, you can actually view your reports weekly. Checking this during and after your divorce process can help you see how the divorce has affected your credit. It can also alert you to any joint accounts you may have missed.
It’ll take some time to adjust to managing your finances all on your own again. So take it day by day. If it feels too overwhelming to do all the above tasks right now, space them out a little. And if you realize something in your new budget isn’t working like you’d hoped, make some changes. Over time, you’ll find a path forward that works for you.
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