How to financially recover after a divorce
Canada Life - Jan 25, 2024
There are several things you can do to help you bounce back financially from divorce.
The financial impact of divorce
There’s no getting around it, both emotionally and financially, divorce is hard. Financially, you may lose a large portion of your assets, or have to pay spousal and/or child support. Although people’s finances can bounce back from divorce, it does take time.
Here are some guidelines to follow to help you financially recover from a divorce or separation.
Ways to bounce back financially after divorce
Create a new budget
Because your household income will likely decrease after a divorce, you’ll more easily manage your money day-to-day if you update your household budget.
Adjust your income to include any changes to government benefits, and child or spousal support. Update your expenses to include any changes in childcare expenses, housing and household costs and your portion of any pre-divorce debt. If your budget falls short, look for ways to save money. When you can, start saving towards an emergency fund.
Keeping or selling your home
You may decide to sell your home and split the proceeds. Or one of you can stay in the home and buy the others’ share by refinancing or giving up other assets.
Although selling your home and splitting the proceeds sounds easy, it can cost a lot of money to sell and buy different homes.
You’ll need to determine how much you can afford for housing. In some cases, it may make sense for a while until your finances stabilize.
Review your insurance needs
A divorce can change your insurance coverage.
If you relied on your spouse’s healthcare benefits for all or part of your coverage, you may need to change to your workplace benefits or buy individual healthcare insurance.
Your life insurance coverage may also need to increase. You’ll need to make sure you have the coverage your dependents will require if something happens to you. You may also need to consider disability and critical illness insurance.
Review your estate plan
You’ll likely need to revise your will and powers of attorney. You may also need to change beneficiaries on life insurance policies and investment accounts.
Revisit your financial goals
Once you have a handle on your post-divorce finances, it’s time to adjust your previous goals and create new ones.
While you may find a new partner at some point, right now, you should plan to save for retirement as a single person.
Look at other short-term and long-term goals like saving for your child’s education, paying down debt or other things such as a vacation.
Create a plan to achieve your goals
I can work with you to set up savings strategies to help make your post-divorce goals a reality. This may include changing your investment strategies or looking at ways to increase your income such as changing your career path or picking up a side-hustle. In a recent Canada Life survey, 63% of women who worked with an advisor throughout their divorce indicated investing their assets had a greater importance now (compared to 42% of those who didn't work with an advisor).
Now that you know the steps to take to financially recover from a divorce or separation, let’s meet to:
- Create a post-divorce budget
- Build a plan to achieve your post-divorce saving goals
- Discuss estate planning changes