Rebuilding Your Finances After Divorce

Going through a divorce can be a very emotional time. But it’s also a major turning point for your finances. Moving from sharing any number of financial responsibilities to standing on your own two feet might seem overwhelming. But it’s also an opportunity for growth and learning.

If you’re recently divorced or in the process of getting divorced, this guide is here to offer you tips on navigating the process. In general, we’ll focus on what financial recovery after divorce looks like, focusing on practical steps like budgeting after divorce. 

We’ll also look at ways you can build your creditworthiness while putting together a new financial blueprint for your life ahead.

Surviving (and thriving) after divorce

For some, surviving financially after a divorce may feel like a daunting prospect. But it doesn’t have to be that way. 

Financial recovery after a divorce is all about embracing change, and taking well-informed steps towards the future. While some divorces can be costly, rebuilding your life after a divorce doesn’t need to take that much time. 

With the right approach to budgeting, debt and credit, you can soon be well on your way to financial stability and independence. How properties are handled during a divorce as well as the dictates of any prenuptial agreements will both play a role along the way.

What is a notice of disassociation?

A notice of disassociation is a request from you to a credit reference agency (like Equifax) that removes the financial link between two people in your credit report. It is commonly used for divorces but also for deaths and when two unmarried people do not want to be financially associated with each other. You can request a notice of disassociation with Equifax via the Online Help function.

Assessing your finances post-divorce

The first step towards getting your financial stability back after a divorce is to take a close look at your financial situation. 

A good place to start is by collecting your bank statements and investment statements. You should also put together information on debts and any accounts you might still share with your ex-partner. 

The idea is to understand what money you have and what’s owed at a broad level. Getting a hold of these will help you make good decisions going forward.

You may also want to look at calculating your net worth as part of the process. Your net worth is your assets minus your liabilities i.e. debts. Knowing what you’re worth can be an important foundational step towards rebuilding your finances after a divorce.

If you have a lot of debt, it may mean you need to be more careful with spending going forward. Meanwhile, if you’re relatively debt-free, focusing on building wealth may be your major goal. 

Monthly budgeting is also very important after a divorce, particularly if your income or expenses have changed. In the next section, we’ll take an in-depth look at how to create a post-divorce budget that works for you.

Creating a post-divorce budget: A step-by-step guide

Once you’ve got a clear understanding of your finances, it’s time to put together a budget that works for your new situation. Here’s how:

• List all your income sources: Note down and add up all your reliable sources of income. This will include things like your salary, any spousal maintenance or child support paid to you, as well as passive and investment income.
• List all your expenses: Next, put all your monthly expenses into categories, then total. This will include things like costs for housing, utilities, groceries and transportation. It will also include expenses related to your children. Take a look at your bank statement, if you think you might be forgetting anything.
• Get clear on your priorities and adjust: Pin down your most necessary expenses every month - things like food, housing costs and utilities. Next, identify any areas where you can reduce spending, if you need to.
• Set financial goals: Think about what financial goals make the most sense for you, now. This might be creating an emergency fund, saving for your children’s education or planning for retirement. 

Navigating spousal maintenance and or child support: Financial considerations

Child support, also known as spousal maintenance, can play a big part in the world of post-divorce finance. 

If you’re receiving payments from a former spouse, they’re likely to be a very important part of your overall income, and ability to provide for your children. However, it’s wise to remember they might not last forever. 

For those who are paying, the cost of spousal maintenance or child support should be seen as fixed expenses in your budget. Always making payments on time will help avoid any legal issues.

Tips for rebuilding credit after divorce

There are a few reasons that your credit score may suffer post-divorce, particularly if you’ve had joint accounts or big debts. If you need to rebuild your credit after a divorce, here are some of the basic steps:

• Close joint accounts: Make sure to either close or transfer any joint accounts to a single person who’ll take responsibility for them. This can help avoid any mix-ups.
• Concentrate on high interest debt: Focus on settling your outstanding debts. Put those with higher interest rates first on the list.
• Open your own accounts: If you need to, begin to build or improve your credit history with your own personal accounts. Make sure to always pay any accounts on time, and if you’ve got credit, try to keep the amount you use low.
• Keep an eye on your credit score: Check your credit score from time to time to track your progress. Checking your credit report can also help you find errors that might be affecting your rating.

Asset management: Securing your financial future independently

Asset management after divorce is about safeguarding what you own. But it’s also about setting the stage for future financial growth.

If you own a home or have investment accounts, consulting with a financial advisor for some strategic planning can be wise. You’ll want to make sure your assets are well diversified, and that they’re in line with your goals. 

For example: are you saving up for your children’s education? Are you focused on providing for your retirement? Working on a financial plan for the short, medium and long term is very important after a divorce. 

This is especially so if there have been changes to how you’re managing your finances.

Investing in your financial well-being

One of the most empowering steps to rebuild your finances after divorce is investing in yourself. This could mean choosing further education, learning new skills, or even starting a new career. 

Also, if your partner made the financial decisions for the two of you, it’s a great time to start learning more about the world of finance and investing. This will allow you to start making good decisions for yourself.

If you feel unsure, working with a financial planner to work out a path forward is also a good idea.

Making your finances and budget work for you

Rebuilding your finances after a divorce doesn’t happen overnight. But it can be a very rewarding journey. While a divorce signifies the closure of one life chapter, it also opens the door to a new beginning, offering a chance to construct a financially stable and rewarding future.

By taking a proactive approach toward understanding your finances, creating a practical and forward-looking budget, and effectively managing spousal maintenance, child support, and debt, you're not just surviving financially after divorce—you're setting the stage for a thriving financial future.