Politics and Legal

6 Steps to Obtaining Financial Independence After a Divorce

Managing your finances and getting financial independence can be challenge after a divorce. Starting your life anew on your own has a high cost of its own. Once you’ve finished paying legal fees and have set up a home for yourself, you will need to find stability in terms of your available finances as well as long term investments. This can feel especially daunting if your spouse was the primary bread winner. But, worry not, it isn’t impossible. Here are a few tips and strategies that could help.

Get a clear understanding of your finances

Now that you are living independently, you will need to understand your personal finances. Start by looking at all your bank statements, investments, tax returns and other retirement statements. This will give you an idea of the resources available to you. If you have any joint savings accounts, this is the time to close them or remove the other person’s name from the account. Make sure you are the only person who can access your money. Look into the beneficiary designations on your retirement and insurance accounts and make changes if needed. If you are changing your name, make sure all your bank accounts, savings and investments reflect your new name. Note that this paperwork may take some time. Also, get the titles for your home, care, etc. transferred to your name.

Create a realistic budget

Budgeting is an important part of financial independence. That said, your budget must be realistic and flexible. The first step towards this is to list out all your expenses. Include the investments you want to make, seasonal purchases, gifts and an amount for an annual holiday. Also include mortgage and home repair costs, college savings and health insurance. You can categorize these expenses into regular monthly expenses and once-in-a-while expenses. Once this list is ready, look for areas you can back on expenses. Maybe one month, you could say no to eating out and put the money saved towards paying your insurance premium. Revise your budget as often as you need to. Lastly, look into creating an emergency fund for sudden repairs or medical expenses.

Create income

It is never too late to start a career. Once you have finished with the legalities, start exploring ways to make money by doing things you like. You may want to teach or if you like arts and crafts, consider ways to monetize this hobby. Look at all your skills to see if they can become passive income streams. If you have small children and can’t leave them alone, look at online opportunities. Don’t worry about how profitable it is – remember, every little bit helps. And eventually, if you persevere, your income will increase.

Know your taxes

If you are receiving a certain amount of alimony or child support, understanding what to claim and what to deduct while filing annual taxes can be confusing. Hence, it is advisable to ask a tax consultant or family lawyers in Chennai for help. Eventually, you should be able to do your own taxes. So, pay attention to what they have to say and understand the process and nuances of filing for taxes. Understand how investments can help you save taxes and if you haven’t handled your taxes before, make a note of the important filing dates.

Work on your credit score

When you were married, you may have had a joint bank account and joint credit cards. Thus, family lawyers in Chennai will recommend that you start building an independent credit score. This will determine your eligibility for home loans, car loans, etc. in the future. If you must borrow money, make sure you borrow only as much as you can afford to pay back. Missing out on monthly EMIs can be very detrimental to your credit score. If you have a credit card, keep your balances less than 30% of the credit limit. Simple things like paying your bills on time can be instrumental in improving credit scores. There are a number of free apps that can help you keep track of your credit score.

Celebrate the small goals

When it comes to building financial independence, you must be patient with yourself.Don’t let it overshadow your life but work towards it diligently. Break it up into small goals. For example, getting your paperwork in your name could be one such goal. Celebrate when you achieve these goals to keep up the motivation.

While family lawyers in Chennai can help you navigate through the legalities of getting a divorce, achieving financial independence is something you will have to work towards on your own. Use your network to connect with people who have been in similar situations and ask them for tips and help. Though, it isn’t necessary that what worked for your friend will also work for you, it never hurts to get fresh ideas.

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