As we leave behind the holiday season and enter a fresh year of resolutions, we often see a surge in divorce filings as couples decide to end their marriages. If you're in the beginning stages of divorce, know that you're not alone during this emotional period. You may be experiencing drastic reactions -- anger, sadness, confusion, fear -- but you'll also eventually feel hope, and excitement for your future.
It's now your responsibility to watch your income and expenses, and confirm that you're living within your means.
The newfound responsibility of managing money can create a significant amount of stress, particularly if you weren't involved in the family finances throughout your marriage. Even wealthy individuals fear the unknown and may lack financial confidence following divorce.
We stress that everyone, whether single, married, widowed, or divorced, remain active participants in managing their own finances. If you weren't in control of your money throughout your marriage, view this as an opportunity to gain knowledge and confidence through taking charge of your financial future.
It's now your responsibility to watch your income and expenses, and confirm that you're living within your means. Make sure you're paying your bills on time, setting a solid retirement plan in place, and saving for your children's education -- while also putting aside funds for major expenses or future emergencies. This might seem daunting, but the newfound ownership over your finances will provide you with the peace of mind to enjoy your new life.
We've provided a few key tips to ensure you're on the path to financial security post-divorce:
Organize your financial affairs. Choose an organized system that you understand to track your income and spending. Have your financial documents consolidated and sorted so you're able to access them when needed. This will help you make the right financial decisions.
Close all joint accounts. If you haven't already done so, close all joint accounts and remove your former spouse's name from any remaining accounts immediately. This includes any bank accounts, investment accounts, and joint credit cards. You can be held accountable for future liabilities on a joint account, so this step is imperative. Furthermore, your contacts need to know that your marital status has changed (as well as any name change) to ensure they're serving you effectively moving forward.
Open new accounts in your name only. You'll need to establish new bank and investment accounts and begin to build your credit history. A strong credit score will help you in the future, especially if you're interested in securing any loans. Request a copy of your current credit score to determine your starting point, and build your score through using your credit card and paying your bills on time.
Update your beneficiaries and executors. Review and update the beneficiaries on registered plans (RRSP, RRIF, and TFSA), pensions, and insurance policies. Put in place a new will with updated beneficiaries, executors, and power of attorneys. This is a critical step following divorce to ensure that your revised wishes are carried out.
Create an emergency reserve. Having an emergency cash reserve provides you with a safety net, should anything go wrong. We recommend setting aside three to six months of living expenses.
Work with a qualified financial advisor. There are financial advisors who specialize in working with recently divorced individuals facing new and unique financial needs. Your financial circumstances have changed -- your goals and objectives, risk tolerance, retirement planning, and philanthropic wishes are different than they were during your marriage. Working with a qualified financial advisor and developing an all-encompassing wealth strategy will help you rest easy, knowing your financial future is being looked after.
Put in place a comprehensive financial and investment plan. The process of developing a thorough financial plan will include not only a detailed discovery of all assets, liabilities, income, and expenses, but also a thought provoking discussion of your life goals and objectives. What is it exactly that you want your wealth to do for you in the future? Do you have the steps in place to ensure you can meet those goals? An investment strategy to complement this financial plan will be the next step in working towards achieving your goals.
This process will help bring to light any changes you can make to achieve your financial desires. Plus, it will give you the confidence and understanding you need to be in control of your life.
These steps will provide you with a solid foundation to build from. Financial confidence takes time, patience, education and understanding. However, once you've worked through the beginning stages, you'll find that your newfound financial empowerment is worth the initial stress.
Securing your financial future is one area in which you can take control, and create peace of mind in knowing your new life will be a great life.
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