(Guest Post by David Bakke – a single father who lives in Atlanta with his young son)
I became a single parent less than a year ago, and the transition has not been easy. No matter the circumstances, a divorce takes a substantial toll on your personal and professional life.
While you recover from divorce, you are certain to encounter many struggles and difficulties. This is only natural.
However, you must continue to monitor your finances. You can’t avoid the emotional stress of divorce, but you can prevent the divorce process from ruining your finances.
Staying on Track Financially Following a Divorce
1. Save on Children’s Expenses
If you have kids, you may find the transition to part-time parenting difficult. After my divorce, I purchased too many items at the grocery store each week. I threw away a lot of food that spoiled because my son only visits twice per week, and we didn’t need as much food in the house.
Exercise caution when purchasing clothes for your children. I purchased many outfits for my son right after my divorce, and he wore them so infrequently that he outgrew them before they got significant use. Your child may get new clothes from your ex-spouse as well; now that you don’t coordinate these purchases, you don’t want to buy unnecessary clothing.
2. Review All Coverages
Your finances may change considerably after your divorce is final, and almost every aspect deserves a thorough review. Begin by reviewing your insurance coverages. You must remove your ex-spouse from your health insurance policy. If you have health insurance through your employer, this is required by law.
You must also remove your former spouse from your auto insurance. If he or she receives an auto as part of the divorce, make sure to transfer the title of this auto into his or her name.
Also, you may need to cut back on your life insurance coverages; you only need enough to make sure your children have enough money should something happen to you. If you do not have children, you should question whether you presently need life insurance at all.
A thorough review of all of your insurance policies can result in a tidy savings in your annual bills, as well as an increased amount of take-home pay. This comes in handy if you pay monthly alimony or child support.
3. Adjust All Spending Plans
This list includes your cell phone plan, your Internet plan, and your cable or satellite television package. If you had a family cell phone plan, you can reduce your monthly minutes.
If you don’t use your computer much, you can cut back on your Internet package, too. While a slower-loading Internet may cause some inconvenience, it can save you a significant amount of money every month. Shaving just $10 off your monthly Internet bill saves you $120 annually.
If you have a premium television package, you can definitely save money by simplifying your TV package. If you enjoy watching movies, consider checking out free DVDs from your local library, or join Netflix and pay a small monthly fee to watch unlimited films. If you trim your TV bill, you will quickly see substantial savings.
On a final note, consider cancelling your land line. You can get by with just your cell phone, Skype, or one of the many VOIP plans for a home-based telephone.
4. Learn How to Save at the Supermarket
After your divorce, you must take responsibility for all of the groceries purchased in your household. For most households, groceries represent the second largest monthly expense after rent or mortgage.
You can save a lot of money at the supermarket by clipping grocery coupons from your Sunday paper, shopping during sales, buying generic products, and joining grocery store rewards programs. By utilizing these money-saving methods, you can reduce your grocery expenditures by 10% to 30%.
5. Revise Long-Term Savings Plans
Once you finalize your divorce, your retirement investment strategy has a whole new dynamic. Depending on your personal situation, you may need to save more for retirement, though in some circumstances, you may want to consider ratcheting back your retirement savings.
You may not need as much to retire now that you are single. Furthermore, you might need more money on hand for your monthly expenses. However, if you didn’t contribute much to your retirement accounts previously, you may need to bump your contributions after a divorce. Options to consider include a Roth IRA and participating in your employer-based 401K plan.
Also, determine who is responsible for your child’s college education fund. Do not expect your ex-spouse to automatically take care of this. Be sure you have a savings plan for your child’s future education, and try to cooperate with your former spouse toward this common goal. Start by investing in a 529 college savings plan – this account allows you to save for your kids’ college and provides a number of tax advantages.
6. Micro-Manage Your Household
While married with my young son at home, I often had too many responsibilities and concerns to worry about things like switching off lights when leaving a room, opening and closing windows, or conserving household energy in other ways. Once you get a divorce, you should have more time to address all of these issues. Micro-managing these expenses will help you save significantly in the long run.
Turn off your air conditioning when you leave the house in the morning, and look into proper home insulation. Unplug devices from the wall, or turn off power strips during the day. Put on extra sweaters and socks in the winter, and wear shorts and t-shirts in the summer to reduce your dependence on heating and air conditioning.
By micro-managing my energy expenditures, my utility bills decreased by roughly 20% once I began living alone. Examine all areas of your financial life to identify further ways to save.
Life after divorce can be hard. I was in a funk for months following mine, and it took a long time to begin focusing on saving money. However, it is important to not allow the emotional strain of a divorce turn into a financial strain. By following the tips outlined here, you can maintain a firm control over your finances as you navigate your way through this difficult process.
What are your ideas for ways to save money and reduce expenses after a divorce?
David Bakke writes on Money Crashers about personal finance, money management, budgeting, investing, and more.