The following is a guest post by Amy Holewa of Financial Dimensions Group.
If you find yourself overwhelmed by finances, you are not alone. Recently, I was in a continuing education class and this statistic struck me: 59% of Americans are worried about not having enough money for retirement and only 16% have a written plan.
We are all worried about money at some point in our lives. When facing divorce this worry is compounded because of the worry about today. A phrase I often hear is “Am I going to be able to afford my life?” Let’s start with the basics.
Step one: What are my expenses?
To begin, I suggest evaluating the last six months of spending. If this seems overwhelming, start today by keeping a notebook of all purchases big or small. This will be tough to look at and you need to be honest with yourself. Don’t judge yourself. You are only looking for the truth about how you currently spend money. The old saying “knowledge is power” is true. Once you understand how and where you are spending your money you can then make informed decisions about how you will spend in the future.
Step two: What are the income sources and how do they fit with what you’ve discovered in step #1?
- Employment income: Changing your tax filing status may change your tax bill, resulting in more or less net income or take home pay.
- Child support: This is a non-taxable income to the recipient.
- Spousal support: In 2018, spousal support can be deductible for the payer and taxable to the recipient.
Step three: What are the assets of the marriage?
Not all assets are treated equal. Retirement account withdrawals are generally a taxable event where as taking home equity withdrawals are not. Does keeping the house work within your budget? Houses have additional expenses such as taxes, insurance and maintenance. Remember to add unforeseen maintenance costs to your budget and create a saving strategy for those dollars.
When considering taking money from a retirement plan for a down payment or debt reduction it’s important to get all the facts. Tax implications should be considered, and I recommend getting an estimate calculated. Realistic understanding of the timing of a retirement distribution will also help you make informed decisions.
Remember, you are not alone. There are resources such as financial planners, bankers and accountants that can help you navigate decisions in conjunction with your attorney. And always remember, no question is a dumb question.
The following is a guest post by Norah Gondeck.
There are five factors that may be affecting your credit score:
1. Payment history: By simply paying your bills on time, you will do well in this category. If you have a history of missing payments, you will not. Paying on time can mean the difference between an average and an exceptional credit score.
2. Debt: The amount you owe is compared to credit limit on both an individual account basis as well as an overall basis. Pay attention to your balances as they relate to your credit limits.
3. Length of credit history: Keeping your old accounts open and active may help to show a more established credit history. Opening and closing new credit accounts frequently may have an impact on your credit score.
4. Inquiries and new debt: Every time you apply for credit, an inquiry will appear on your credit report. Excessively shopping for credit and too many inquiries in a short period of time can hurt your score. Most often, when shopping for a mortgage, multiple mortgage-related inquiries within a short timeframe will be counted as one inquiry.
5. Type of debt: There are two main categories of debt: installment debt and revolving debt. Installment debt is a loan that is repaid by the borrower over a set period of time in regular (usually monthly) payments that include principal and interest. Examples of installment debt include an auto loan or mortgage. Revolving debt is money owed to a creditor who sets your monthly payments on your current balance. Credit cards are an example of revolving debt. A good credit mix would include both types of debt.
The following is a guest post by Jennifer Beckman of Beckman, Steen & Lungstrom.
Getting a divorce may feel like an overwhelming process, as if you’re drowning in a sudden wave of decisions. You might not know where to start, especially when you are also trying to take care of yourself emotionally. Keep in mind that you don’t have to walk through this process alone and your attorney will help you through your divorce process.
These five questions will help you make sure the attorney fits you and your needs.
1. How often do you mediate cases and how often do you take them to trial?
Asking this question will give you an idea of how the proceedings will go, and if they will go in a way you want. Whichever method you think will work better for your case, you will want to make sure the attorney is well versed in that method.
2. What good and bad points do you see with my case?
This might be a tough question to ask, but it is a great way to test how forthright the attorney is. You want to feel like you can trust the attorney to give details plainly to you.
3. How do my opinions and input factor into the decision-making process?
You might want your opinions to have a high input in the decisions, or you might want someone else to take more control in order to help lift some of the burden from you. Either way, you will want to make sure the attorney matches what you want.
4. How/what will you charge me?
This questions is important, especially since you’ll need to evaluate what your financial situation will be after the divorce. It might be hard to think about this post-divorce future, but it’s important to make sure the attorney’s price fits your needs and won’t put you in a hole afterwards.
5. How will you communicate with me?
This questions will give you a clear picture of whether or not the attorney will communicate in a way that works best for you. It will also show you how flexible they are. Phone calls and emails are pretty standard means of communication, but maybe those don’t work best for you. Do they text? Do they make Skype calls? It’s important to feel like your attorney will work with your preferences to make sure you stay well-informed.
The following is a guest post by Jennifer Beckman of Beckman, Steen & Lungstrom.
For many newly separated individuals, learning to develop a budget on a single income is one of the biggest challenges of moving forward with a new life. Your standard of living may need to decrease in order to meet your new financial position. In some cases, you may need to make significant changes to your lifestyle as you move forward. A basic understanding of the do’s and don’ts of budgeting for newly separated individuals, however, will help make that process easier.
As you develop a new budget for yourself, the first thing you should do is take a look at where you are. What are your fixed expenses: car payments, rent, utilities and other payments that you know that you’ll have to make each month? What does your income look like? Understanding how your expenses match up to your income will help you make smarter choices about your variable income.
Following your separation, you should make a serious effort to pay down debt. Divorce can create a hit to your credit score, especially as you close lines of credit that you and your spouse had opened together and have a change in major expenses. Make sure that you make payments on time every month.
Make sure that you update any important financial documents following your divorce. Close joint accounts that you had together. Write out a new will that explains how your assets will be distributed in the event of your death. These simple actions could save you or your dependents a lot of heartache down the road.
Try not to dive straight in with major expenses. What you think you can afford now may turn out to be very different from what you can live with for the next several years. Avoid a pricey new car, an expensive new residence or anything else that could cause you to sink into heavy debt immediately following your separation.
During this difficult period of your life, you should also be careful not to lose track of the distinction between wants and needs. Things that you have been accustomed to having may no longer be necessities. You may have to make some serious cuts to expenses in order to meet your new budget requirements. Dropping your phone plan to the minimum level, getting rid of cable and eating at home more often–even if you hate cooking for one–can all help reduce your expenses and make your budget easier to live with.
Going through a divorce or separation is a challenge. By avoiding new debt and learning to manage your new financial situation appropriately, you can help reduce your stress levels and make your situation more bearable.
Some divorced women are financially secure and comfortable while many others are struggling and scared. Some women have strong money management skills, and others have let their spouse handle the finances and have found themselves with no money left to manage. And emotions range from irritation to terror.
Wherever you find yourself, these 4 points can help.
1. Surround yourself with great professional help. Find a financial planner, a banker, and insurance agent, and others you may need, who you trust and are comfortable working with. And, if at any time, you feel any of these professionals in not a good fit for you, find someone else. Many of us stay in a bad relationship too long…whether it be personal or professional.
2. Start where you are. If you can only save $5 a month, that is where you start. If you want to contribute to a cause that is dear to your heart and you can only contribute $3, that is what you do. As you rebuild your life and your financial security, you will be able to do more.
3. Attitude is so important. (don’t you get tired of people saying this!) Believe you will be able to rebuild your life. Value yourself and your future. Be grateful for what you do have. And remember, it’s not “cold, hard cash”…it’s soft and warm!
4. Be willing to move forward. I went through a phase where I thought if I stay broke and miserable, then I can say, ”See what he did to me, that no good, so and so.” It took a while to realize if I continued to do that, I was allowing him to continue to control my life…geez..not a good idea! Instead, I took the advice of a friend . When I shared feeling so financially damaged, she responded, “Consider that the ransom you paid for saving your life.”
5. You, too, are saving your life. A life that is filled with possibilities, and financial growth.