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Good Habits of Financially Smart People After Divorce

1. Set Financial Goals.

You don’t have to have a lot of money to set financial goals. As a matter of fact, you don’t have to have any money at all. You just need to want to have money and decide where you want to be financially in five, ten or twenty years. Do you want to be able to buy a new house? Do you want to help put your kids through college? Do you want to be able to retire before you turn 102? All of these are (or could be) financial goals. Financially smart individuals not only make financial goals, but they also spend time working to achieve them.

2. Check Your Credit Reports/Scores Regularly.

When you are newly divorced, you need to make sure that the financial ties between you and your spouse really do get broken, and that your credit is not suffering because of his or her debts. Watching your credit report is the easiest way to do this. I speak from personal experience on this one. My ex's financials were a train wreck. It didn't reveal itself right away. It was a couple years after our divorce, when I tried to refinance the property that I was impacted by his low credit score and financial problems. His name was still on our HELOC and caused an impenetrable wall to getting approved for a new mortgage. The solution to that problem was to refi and absorb the HELOC so that it (and his connection to my financial life) disappeared.

3. Follow-Up On Divorce Retirement Benefits.

As part of my practice, I draft and file Qualified Domestic Relations Orders. It troubles me how many people wait years and years after their divorce to take care of this. Lots of people don’t realize this, but it takes more than a divorce judgment to transfer retirement benefits from your spouse to you. Most of the time it takes a special court order called a Qualified Domestic Relations Order to make the transfer actually happen. If you didn’t get that order entered at the time of your divorce, you must make sure that it gets entered as soon as possible after you’re divorced. Otherwise, you won’t ever receive the benefits you were supposed to get.

4. Make A Budget.

If you have just been through a divorce, you probably already made a budget. During the course of your divorce case, you (or your attorney) likely prepared an Income and Expense Declaration (Judicial Council Form FL150). If you completed this form, you have already put together a list of your income and expenses. That is your budget. You may have to tweak it a little bit, but most of your work is already done. If not, that form is freely downloadable from the court's website.

5. Try to Live Within Your Means.

Once you make a budget, you have to live within it. Very likely, that will mean saying “no” to a lot of things you used to say “yes” to – including to your kids. If you look at that reality with anger and despair, you will suffer. If, however, you take your new financial reality as a challenge, set financial goals for yourself, and live within your means, you will soon find yourself rising up the financial ladder, instead of staying stuck on the bottom rung.

6. Be Mindful of and Manage Your Taxes Before They Are Due.

This applies mostly to people who have their own businesses and/or do not receive a regular paycheck from which taxes are taken. In those situations, if you have not been paying estimated taxes throughout the year, you have to pay all of the taxes on your income at one time, in April, when you file your income tax return. If you have been financially smart and saved a percentage of each source of monthly income, you will have no problem paying your taxes. If not, tax time will not be a good time for you! Heads up! Spousal support is taxable income. And, if your ex happens to be paying arrears (back child and/or spousal support), he/she can submit a Form 1099 for any interest accrued. Be prepared.

7. Understand Your Personal Finances.

You do not have to be a CPA or a financial planner to understand your personal finances. You just need to know a few simple things: What do you own? What is it worth? What do you owe? How much and to whom? That’s it. Write that information down and you have your own, personal balance sheet. From there, you can start planning your financial future from a place of knowledge and strength. This might be a good starting point for drafting an Estate Plan that includes a living trust and pour-over will. Keep all of this information in one place, such as a notebook that you keep in a specific place where it can be easily found.

8. Always Do A Cost/Benefit Analysis Before Taking Your Ex Back To Court.

Going to court is expensive. It also comes with no guarantees. You can spend a lot of time and money fighting in court and end up no better off than you were when you started. To keep the court system from sucking your finances dry, the best plan is to try to work out as much as you can with your ex outside of court. Only go back when you have no choice. Also, before you file anything in court, make sure that you have taken a good, hard look at the maximum amount you can possibly get by going to court, and the maximum amount you will have to pay to do that. Unless you stand to gain much more than you stand to lose, going back to court may not be worth the effort. Reasons you may be considering for taking your ex back to court include missed support payments. Note that a contempt order rarely results in you getting paid. If you are the one getting behind, GET ON TOP OF IT. Don't wait. If you lost your job, get your support orders modified immediately. As long as an order exists, you are required to comply with it.

9. Contribute To Your Retirement Even When You Think They Can’t.

When you barely have enough money to pay your basic bills, saving money is the furthest thing from your mind. However, even if you can only put $5 a week in your retirement account, that will be a start. While contributing such a small amount may seem pointless, interest compounds. That means that even small contributions can result in big gains over time. Further, making any contribution gets you into the habit of being a saver. That is a financially smart move no matter what your current financial situation may be.

10. Be Generous.

What ?? Why would you give money to charity or share what you have when you have so little? The simple truth is that you get what you give. If you don’t have any money to share, share your time. Share your energy. Volunteer. Will doing that guarantee that someday you will be a millionaire? No. But it will make you feel better right now

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