Collaborative Post¦ In this article, we’ll provide helpful tips for staying on top of your finances following a divorce.
Divorce is never a walk in the park, especially when it comes to the financial side of the process. Divorce financial settlements can be used to make things a little more straight forward between a separating couple, but often a family lawyer is needed to help arrange these settlements.
People may feel a little lost after a divorce with navigating life on a solo income. That said, we have some helpful tips to help you feel back on track. Keep reading for a survival guide to sorting finances out after a divorce…
Establish a New Budget
A good place to start when it comes to addressing your finances post-divorce is to establish a new budget. An easy way to do this is to create a spreadsheet either on the computer or, if you prefer, a handwritten spreadsheet is also useful.
Try to establish what your total income is per month, and then list all your outgoing, categorising them in three parts:
- Needs: should include all essential bills such as rent or mortgage, house bills, phone bill, food shop and any car payments.
- Wants: should include bills that aren’t considered essential, such as tv subscriptions, gym memberships, shopping and holiday funds.
- Savings and debt.
Having all this information in front of you gives you a real idea of whether you’re living within your means and where you could potentially cut back.
Make Cutbacks
Once you’ve established your new budget, it’s time to make cutbacks! The first things should be considered for the chop are things that you may have financially shared with your ex-partner. TV subscriptions is a simple area to start with; previously you may have felt ok about splitting numerous subscriptions but now you’re paying them alone, is it worth it?
If you need to make large cutbacks, there are bigger areas to focus on including:
- Mortgage or rent – should you consider downsizing?
- Car payments – could you swap your car for a cheaper model?
- Credit cards – could you consider switching accounts to a lower APR?
Of course, it’s important to also prioritise the type of cutbacks you make in terms of what keeps you happy. For example, if you rely on a gym membership to keep on top of your mental health, it’s best to keep that direct debit going and cut back on other areas of your life.
It might seem a little pointless to cut back on little things, but you’ll be surprised how quickly the little payments on things add up.
Set Realistic Goals
Now you’re on a single income, it’s important to set yourself some financial goals. Whether it’s to pay off debt over the next few years or save for a new home or for your children’s education, it’s a good idea to set yourself steps to follow in order to achieve what you want.
Simply setting goals can help motivate you and keep you on track when you’re feeling a little out of control, especially following a divorce. The goals you set don’t have to be completely concrete, so allow yourself some flexibility along the way.
Set Up Direct Debits
Setting up direct debits helps ensure you stay on top of paying your essential bills. A lot of people tend to set their direct debits up for the day they get paid. That way, they know exactly how much they have to spend for the rest of the month without worrying about unpaid bills.
Track Your Spending
Now that it’s just you making the monthly payments, it’s a good idea to track your spending throughout a month. There are banking apps available, such as Monzo, to help you keep track, and some even allow you to create ‘spending pots’ to make paying for things a little easier.
Tracking your spending is not to punish yourself or make you feel guilty about what you’re buying, it just simply gives you better insight to where you could cut back potentially in future. If you’re not amazing at keeping track, then try looking back at statements from the past 3 months that already exist, and identify things you commonly buy still to be aware of.
Become More Frugal
Having the discipline not spending money is really important when it comes to managing your finances. We live in a world where we constantly see new shiny things as a desirable, often at the expense of our own budgets.
It’s said that 85% of Brits admit to spending money on things they’ve never or rarely used over the past five years. Admittedly, it’s difficult to not ‘treat yourself’, especially after an emotional experience like divorce. However, there are plenty of ways to spend less money and still feel the rewards of treating yourself.
For example, if you want to continue clothes shopping, then consider checking out apps such as Vinted where you can buy second-hand (often items are brand new for a fraction of the original price). This will save you so much over the course of a few months.
Other ways you can become more frugal include:
- Swap food supermarkets – consider Lidl or Aldi.
- Use cash instead of card to track spending better.
- Avoid using shopping to deal with emotions.
- Collect vouchers including points at supermarkets.
- Buy second-hand toys, clothes and materials for your children (they grow so quick it’s often not worth buying new).
Sorting your finances after a divorce…
Getting on top of your finances after a divorce can be tricky, and you may not know where to start. Use the tips in this guide to help you pinpoint some key areas in your finances you need to focus on. Start with creating your budget and work from there.
Remember, no one is perfect, so allow yourself to be flexible in your goals and budgets so that you’re not too hard on yourself. Avoid emotionally charged spending and seek advice from a finance professional if you feel really lost with your money.
Disclosure: Please be advised that this article is for general informational purposes only, and should not be used as a substitute for advice from a trained legal/financial professional. Be sure to consult a legal/financial professional if you’re seeking advice on your money post-divorce. We are not liable for risks or issues associated with using or acting upon the information on this site. This article is brought to you by Hatten Wyatt.