5 money-savvy tips to recover from a divorce

Going through a divorce was one of the most stressful times in my life. Instead of growing old as a couple, I was forced to start over, alone, and I was confused as to what direction to take. After the emotional dust had settled, the most frustrating aspect was trying to rebounding financially.

Fortunately, I had some divorced friends and relatives, and I was the recipient of some incredibly useful advice. It took some research on my end as well, but most people can not only recover financially from a divorce, but end up better off than when they were married. Here are some of the hard-earned financial lessons that I learned when going through my divorce.

1. Planning For Retirement

The first thing I did was educate myself on the insurance, investment and retirement planning that my soon-to-be ex and I did. Even though we largely collaborated on these decisions when we were married, I didn’t pay the premiums on the life insurance, nor did I know how to access his company-sponsored 401(k). In fact, I didn’t even know where to access an old 401(k) from one of my previous employers, so I had to do a little digging on both his assets, and my own. Once I located all of the assets, I had a financial planner friend help me calculate the long-term financial benefits of the insurance and retirement plans. Calculating compounding growth and tax consequences isn’t an easy task, and there is a little art mixed with the science when it comes to determining what you think stock and bond growth rates will be in the years and decades to come. But with some help I was able to arrive at a reasonable approximation of the value of these assets.

2. Credit Check

The next thing that I did was to check my credit report. It turns out that my credit was very good, largely because I was listed on all of the accounts with my husband, so I received credit for paying our bills in a timely manner for years. However, I have heard horror stories from women whose names weren’t on their accounts, and therefore had virtually no credit history for the years that they were married. Even worse, many times, an ex suffers consequences that are the result of the other partner’s poor financial habits. Knowing what my score was gave me a lot of peace of mind, something that is in short supply when you are going through a divorce.

3. Single Budget

After I understood the value of the assets we had, and accounted for the money in the bank, I decided to create a realistic budget for myself as a single person. Some friends had made it clear that as a divorcee, I probably wouldn’t be able to maintain the same standard of living I had while married, but I needed to find out for myself. Knowing what I could and could not afford helped me make a couple of major decisions, like where to live, or that perhaps I didn’t need a new laptop.

I made a couple of changes, including kicking caffeine once I realized just how much money I was spending at Starbucks, but things weren’t as bad as I had anticipated. For example, I was used to having a cleaning woman come to the house once a month, but in a smaller apartment I didn’t need one. Since I wasn’t constantly fighting with my husband, I had more free time after work, so I was able to cook more meals and eat out less — another money saver! I also had to cut back on my retirement savings a little in order to make my budget work, which taught me the most valuable financial lesson I learned during my divorce: Don’t ignore the future.

4. Prioritize Saving

Building up a savings account gave me more peace of mind than anything else that I was able to do during my divorce. I received more psychological benefit from seeing that nest egg growing than anything else. It was a cathartic experience, and I used the opportunity to shed some of the assets from the marriage that I didn’t need any more. I sold a lot of our furniture that neither of us would need while living alone, like a formal dining table. I got a newer but less expensive car, and I managed to sell my diamond ring online in order to fund my savings account.

5. Final Separation

Finally, I completely separated myself financially from my ex. I closed joint accounts, transferred the car title and registration to my name. I even updated my will and insurance beneficiary information just to ensure a complete break and a fresh start.

It wasn’t easy, or fun, and it took a lot of work, but I was able to make good decisions thanks to some great advice, and come out of the divorce with my financial life intact!

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There are 14 comments to "5 money-savvy tips to recover from a divorce".

  1. Ren says 25 August 2013 at 08:31

    Thanks for the article and best wishes.

  2. Matt @ Your Living Body says 25 August 2013 at 08:56

    Sorry to hear about the divorce. Good tips – for those going through a divorce or not.

    • Thomas | Your Daily Finance says 26 August 2013 at 03:44

      Sorry to hear about the divorce as well but sounds like you are doing well and have since moved on. Congrats on the new husband. One of the things I hear is that the savings/retirement accounts getting depleted if its a bad divorce. I’ve heard costs go into the thousands of dollars. You would have to stop and thing about how you need to live as a single person and not how you use to live on two incomes. If kids are ever in the mix it makes it that much tougher.

  3. Brian says 25 August 2013 at 10:41

    Sorry to hear about your divorce. I think these same steps should apply if you are married or single. In a marriage both partners need to be on the same page with budget, retirement etc to make it work.
    I have a family member who recently was divorce and he has found the same results. We a little focus and planning his has been able to manage well.

  4. Colin Williams says 25 August 2013 at 16:33

    Read the article and we have identical issues here in Australia. Great advice especially about the retirement planning. It’s understandable that people focus on the immediate issues, however, the long term effect of divorce on your retirement savings, especially on women who have often sacrificed an ’employed’ career to raise the children can be devastating.

  5. Cathy says 25 August 2013 at 21:18

    Thanks for the article! Two more money-related things I wish someone had mentioned to me before I finalized my divorce (which luckily, was incredibly amicable and as a result, super cheap):

    1. Pay close attention to the credit card accounts you decide to close out. My ex and I split our cards, both of which had long histories. I decided to close the ones I ended up with because they had an annual fee. What I didn’t realize is that my credit took a hit as a result (your available credit goes down and your average credit history goes down if you close out a long-standing card with a good-sized limit), and when I applied for new cards, they gave me cards with smaller limits. Not a huge deal, and luckily I don’t need that much credit (I pay my bills off each month), but worth paying attention to.

    2. Make sure you realize what your tax situation will be the year you finalize the divorce. Because I made a lot more than my ex, I was surprised by how much I owed (and since the divorce was final towards the end of the year, it was too late to significantly change how much I had withheld for the year).

    Hope that helps someone out there!

  6. Jane Savers @ Solving The Money Puzzle says 26 August 2013 at 03:32

    I have been divorced for several years but I am still in a hole of debt that I can’t get out of. Trying to support 2 sons and help them pay for university has left me with debt.

    You have done very well but I am considering submitting my story because it doesn’t always go this smoothly.

    • Ely says 26 August 2013 at 10:35

      I think you should! It can be discouraging to hear only from people who have come off really well. Your experience is at least as important to hear.

      Plus who knows, perhaps some commenter will offer an insight helpful to you! 🙂

  7. Jon @ MoneySmartGuides says 26 August 2013 at 04:05

    I think it is easy for a person that just divorced to not realize that they have to create a new budget. I have clients who have gotten divorced and one of the spouses continues to live like they were married. In their case, one spouse was the breadwinner and the non-breadwinner is the one still spending wildly. They even wanted to buy a vacation home. We had to break it to him that since he only makes $50,000/year, buying a $1 million dollar plus vacation home was not realistic.

    Glad to hear you were so proactive with your finances.

  8. Debi says 26 August 2013 at 08:56

    It’s very important that people understand the importance of changing beneficiary information when divorcing. My sister recently divorced and was feeling good and proactive that she had changed her will. I asked her about her retirement beneficiary and she wondered what that had to do with anything. She was very surprised to hear that beneficiaries are not affected by a will.

  9. celyg says 26 August 2013 at 15:14

    One more tip — the cost of divorce itself can be staggering (legal fees). Consider collaborative divorce, in which lawyers are working with one another (not against), to ensure a quick and fair settlement for both parties. This drastically cuts down on costs and is a smoother process for everyone involved. However, it only works if both parties are willing to be respectful and no one is contesting the divorce itself.

  10. Anton Ivanov says 26 August 2013 at 18:38

    Divorce can be very painful and stressful – especially financially. I think you hit a home run with your first tip – knowing the full financial situation is a must for both women and men during a divorce. You will be able to minimize any damage and quickly address problems if you know the ins and outs of your financial situation.

  11. Jonathan says 09 November 2013 at 19:02

    Divorce is frightening. It is happening to me after returning from my military service in the Middle East.

    Thank you for the succinct step by step finance snapshot.

    I appreciate you sharing the information.

  12. Radman says 04 January 2017 at 10:46

    Divorce is a major life changing event. My divorce was extremely costly. I had a college educated spouse from the Philippines that spent every penny I made and complained when it was gone. She lied, cheated and constantly abandoned the marriage home. I immigrated her & her entire family. I stayed married for 23 years out of sense of duty & religious convictions.
    In hindsight, I should have cut ties after her first abandonment of the marital home. My advice to all men is divorce earlier rather than later is prudent. Staying in a loveless marriage with a user only benefits the user.
    Post divorce should be handled like a business. Emotional attachments to material possessions isn’t prudent. Think dollars & cents with a success path toward financial freedom.

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