If you’re divorced or separated, money management will become an important part of your life. While it may be true that money can’t buy or ensure happiness, your ability to manage your finances can play a large role in your financial future, and to a large extent, your ability to live life on your terms.
A huge amount of time is not necessarily required to get your finances moving in the right direction. It is often simply a matter of attending to the “basics.” The following steps may help you stay on track:
- Pay Yourself First. Transfer a set amount from your earnings to your savings each month. Even a small amount in the beginning helps.
- Reduce Consumer Debt. Avoid high credit card finance charges by paying off the balances each month, or if you must carry a balance, use only cards offering low finance rates beyond the introductory period.
- Maintain Good Credit. You can obtain one free annual credit report from each of the three major credit bureaus: TransUnion, Equifax, and Experian. Good credit is required for obtaining loans and low interest rates. Monitoring your credit can also help you guard against identity theft.
- Diversify Your Savings. Develop a plan for your short- and long-term needs. Consider your liquidity needs, risk tolerance, and time horizon for retirement. Be sure to consult a qualified financial professional to determine an appropriate strategy for your financial future.
- Take Advantage of Tax Benefits. If you qualify, contribute to an Individual Retirement Account (IRA), an employer-sponsored 401(k) plan, or another similar retirement plan. These plans offer tax benefits that may help enhance your retirement savings.
- Update Your Estate Plan. Have your will and any trusts reviewed by a legal professional. Prepare advance directives, such as a durable power of attorney, living will, and health care proxy. This is important for everyone at any time, regardless of age.
- Review Your Insurance Needs. Periodically review your risk management program. Your life, health, and disability income insurance needs will likely change as you progress through various life stages.
- Plan for Future Care. Consider your possible long-term care needs. Have you ever thought about your future care needs, should you one day require help with activities of daily living, such as meal preparation, personal care, dressing, and housekeeping? Long-term care insurance increases your care options, should the need arise by helping to cover care at home, an assisted living facility or in a nursing home.
- Build a College Fund. College tuition, at a public or private institution, continues to rise. So, relying on your children to receive scholarships or financial aid may not be the most practical strategy. Look into opening a 529 college savings plan or other college planning account. As soon as possible, begin saving for your child’s education. Eighteen years can pass quickly.
- Set Long-Term Financial Goals. Establish one-, three-, five- and 10-year goals. Evaluate your progress yearly and make adjustments, as appropriate, to achieve long-term success.
Whether you’re divorced or separated, straightening out your finances can become a top priority. Make a commitment now to start this planning process. Attention to the basics may help you meet your financial goals and improve your emotional and financial well-being.