On Your Own
Getting through a divorce can be an emotional rollercoaster, but once you have moved on you need to focus on your financial future. The first steps in building a new life include establishing your own credit and building a new budget for yourself.
Establish Your Own Credit
It's important to qualify for credit in your own name so that you will have credit resources once the divorce is final.
The first step in establishing your own credit is getting a handle on your own banking serves and building your credit rating.
- Chequing Account Basic chequing accounts are designed for day-to-day transactions and bill paying. A chequing account is the foundation for personal finances, so it's important that you establish one in your own name. These accounts are readily available and easy to open. Research the monthly fees associated with maintaining an account.
- Credit Card Regardless of your marital status, you should always have a credit card in your own name. It can help you keep up a good credit rating for when you need it. It can also be a powerful source of funds in case of an emergency. Be sure to research which cards are right for you. Get information on selecting a credit card that suits your credit habits best.
- Dissolve Joint Accounts Review all of your joint accounts. If there are any with your name on them, move promptly to take it off. This includes brokerage accounts or any other type of account that offers to advance any credit.
And once you have some credit in your own name, close or freeze all joint credit-card accounts. You won't be able to fully close an account if the balance is not paid in full, but if you freeze the account you can be sure that no one can charge any more to it.
- Check Your Credit Report Ordering a copy of your credit report will help you identify and close each account you and your spouse opened jointly. If there are any left on your credit report, call the credit lender directly to close it. Then follow up with a request for another copy of the credit report, to make sure it was closed as you requested.
Build A New Budget
After a divorce, your financial situation will probably be very different than you are used to.
Take some time to get familiar with it. A new budget is the first step to take in adapting to your new financial circumstances.
Get Organized by making copies of all the important paperwork that resulted from the settlement and put it somewhere safe.
Create A Budget by writing down your expenses to find out where your money is going. Pull out your credit-card bills and bank statements from past years as guides to your spending habits. Then estimate how much your new bills will be. Be sure to include expenses for entertainment, clothing and other major spending categories. Include some money for savings. It may take several months to fine-tune your budget. Download the Budget Worksheet (pdf) to help get you started.
- Estimate Your Monthly Income. Don't include potential income — only income you are sure to receive. Spousal and child support may be included, but only if you are confident that your spouse will pay for them.
- Check your budgeted expenses against your income. Do you have more going out than you have coming in? If so, you need to cut expenses. Entertainment bills are easier to trim than fixed costs such as utilities and housing. Keep trimming until you have enough income to cover your expenses. It may hurt at first, but settling into your new financial situation is critical to long-term financial fitness.
Invest In Your Future
The last step is to take whatever proceeds there may be from your divorce settlement and invest them. If you have lost insurance coverage, replace that as soon as you can. Then start saving for your retirement.