ADJUSTING YOUR FINANCES AFTER A DIVORCE
Going through a divorce can be very difficult. It involves a lot of stress and frustration. It also requires you to adjust to a whole new life.
Did you know that divorce is one of the most common causes of bankruptcy? People going through a divorce have so much to deal with that they often neglect their finances and get themselves into a big mess.
Here are some tips to help you avoid a financial mess during your divorce:
Determine Your Income. Your finances will be different after your divorce than they were before. First, determine your income. Include income from your job, child support/alimony, government support, significant other, or any other income source.
Add up Your Expenses. Be sure to include rent, car payment, insurance, utilities, food, child care, and payments on debts. You need to ensure that you can cover all of your monthly expenses. It’s also a good idea to include what you usually spend on non-essentials like entertainment. If your income is less than your expenses, you need to reduce your spending and/or increase your income.
Take Action. As soon as you’ve identified a potential financial problem, work to solve it right away. Do you need a better-paying job? Should you move to a less expensive home? What non-essential spending will you cut out? The sooner you can balance your budget, the better. It will save you a lot of stress in the future.
Consider Bankruptcy. If you leave your marriage with more debt than you can repay, consider filing bankruptcy. Single parents are the most common filers of bankruptcy. This is because single parents realize that taking care of their family is more important than overworking themselves to repay creditors—there aren’t enough hours in the day to do both.
Prepare for Your Tax Return. It’s worthwhile to talk to a tax advisor to make sure that you don’t make mistakes that can cost you money. Be sure that your divorce decree states who can claim children as dependents on their tax return. You should be aware that the IRS will usually give the child tax credit to whichever parent files first, regardless of who is entitled to it. If your ex claims the children incorrectly and files first, you will have to go to court to get the tax credit returned to you. If the court determines that you improperly claimed the child tax credit, be prepared for a big tax bill with interest.
Don’t panic. You can deal with your new financial situation. Many people have survived divorce, and you will, too. If you need help determining a budget or figuring out what to do about your debts after a divorce, give our office a call. We’ve helped over 10,000 Upstate New Yorkers, and we’d love to help you, too.