9 Debt Management Strategies
For anyone going through a divorce, there is often a significant concern surrounding finances. You will have to make financial decisions that could hugely impact your life—as well as your child's life—moving forward.
How you will handle child-related costs like school tuition, how you will divide your assets, and how you will tackle shared debts are all crucial decisions to make during this transition. Financial obligations that you took on during your marriage won't just dissolve after divorce, nor may they be split between you two in a way you were expecting.
When managing debt, one can either deal with it or set it aside, thus making it worse. As a parent, it's likely to be in your family's favor to handle your debts in the smartest, healthiest way possible.
9 Debt Management Strategies for Divorced Parents
These nine debt management strategies can help you manage the dues you owe and improve your family's financial standing overall.
Make Smart Decisions About Shared Assets
Letting go of things you once enjoyed as a family is so hard. But some expenses—such as a home mortgage or car payments—can be much bigger of a burden to maintain than you might expect.
Come to a smart decision about what to do with more substantial, expensive assets. If you don't have enough income to meet these financial obligations, you should consider another solution even if that means letting go of these items. Hanging on to something you cannot afford could lead you into a much more complicated financial situation like bankruptcy.
Track Shared Parenting Costs
Along with your co-parent, you will have to determine how to maintain your child's financial well-being jointly. Help to promote economic stability in both of your child's homes by doing your best to track parenting expenses and reimbursements.
Child support is often an essential element for many co-parents in managing child-related expenses. Make a plan for how child support will be paid and how it will be spent. Knowing where you stand together on parenting costs and child support will help you both to manage your overall expenses. This is a positive stance for your whole family.
Keep Up With Personal Finances
Budgets are only useful if you stick to them. Make it part of your routine to record your income and spending. You may choose to do this once a day, but at the very least, try to do so at least two or three times weekly. Writing down your gains and losses will give you a clearer picture of what you're earning and what exactly you are spending your money on.
These notes can demonstrate how you're spending your money. It may even show you where you should cut your spending. This may be the case if you find that you are spending too much on entertainment and don't have much left to spend on things like groceries or utilities. Moving forward, you can adjust your spending to fit your needs accordingly.
Monitor Your Credit (Or Built It, If You Have None)
Credit card debt can be particularly challenging to deal with during a divorce. If you and your co-parent had a joint line of credit, it could be hard to determine who spent what. In this situation, you both may be responsible for paying that off. Work together as best you can for deciding how to handle this debt, emotions aside.
As for your personal credit, keep a close watch on it during this transition. Pay it off as best you can, and never miss monthly payments. Always strive to pay at least the minimum fee each month.
On the other hand, if you don't have any credit under your name whatsoever, consider building it by opening your own personal credit card. While you won't want to incur debts that you cannot pay, try making small purchases on your card that you can pay off right away each month. Building credit will prove to be extremely helpful when you want to do things like renting an apartment, buying a home, or making other large purchases.
Prioritize Paying Off Debts With High-Interest Rates First
The interest rate of each of your debts can hugely impact your ability to pay them off. The higher the interest rate, the more you're likely to pay if you are not paying your debts off all at once.
Paying off expensive debts is important, yet paying off the ones with high-interest rates first can help you to not spend as quite as much overall. Prioritize paying off these loans first, then continue to tackle any others with lower interest rates.
Cut Corners Where You Can
After divorce, you will want to provide your child with a lifestyle similar to how they lived previously. However, for some, having debts and other financial issues might make it hard to keep up with that same lifestyle right at this moment.
Cutting corners on your home-related spending might sound difficult, but a few simple changes can make a major difference and help you save money. For instance, consider refurbishing large items like tables and chairs before buying something else for your new home. You can also check out thrift stores for good deals on lightly-used items like clothing and furniture.
Take up energy-saving practices that can help you save money on utilities while doing good for the environment. Moreover, you can cut corners on spending by becoming a savvy shopper. Look for deals each week at the grocery store, or check on sales at your favorite stories. These little things can help you save overall.
Stop Impulse Buying
As a parent, you can only cut corners so much on child and home-related costs. What you should really cut from your spending are impulse purchases.
Resist the urge to grab that quick snack at the convenience store or running through the drive-through at the coffee shop. Instead, pack snacks, and make coffee at home. The money you save can be spent on more important things like your child's extracurricular activities or a special family vacation.
Talk to a Professional
A divorce can greatly complicate a person's financial standing. It can be hard to know how best to navigate money-related challenges as you work through this transition.
If you have doubts or questions about how best to manage your expenses post-divorce or separation, consider reaching out to a financial professional who specializes in divorce. A CDFA can be an excellent resource to help you manage your personal and shared expenses and manage debt after divorce or separation.
Use Tools to Support Shared Parenting Expense Management
Using the right tools to help you manage your shared parenting expenses can support your personal debt management. It can also promote financial stability in both of your child's homes.
On OurFamilyWizard, co-parents can record child-related spending, make reimbursement requests, and even send secure e-payments to one another, all with ease. Every entry is thoroughly documented, and both parents have equal access to create customizable reports of expenses and payments.
Managing debt after divorce will have its challenges and potential pitfalls. It might not always be easy, but keeping up with it is key to promoting a sound financial future for your family.