Money Management for the Newly Divorced

Divorce can be one of the most financially devastating events in life. The costs that accompany divorce include legal bills and the cost of an additional residence, and with around 45% of marriages ending in divorce, millions of Americans face the financial strains of divorce every year. When a second marriage ends in divorce, money management strains can be even greater, because couples may have children together as well as children from previous unions, prenuptial agreements are more likely to be involved, and people in second marriages are often older, with more deeply ingrained financial tendencies.

Good money management after divorce should begin before papers are filed to minimize potential financial problems. If you are divorced or in the process of divorcing, smart money management requires considering your income, regular bills, short term goals, health and life insurance, retirement planning, and emergency funds.


Take an honest look at your income post-divorce. Include all sources of income, including your job earnings, any investment earnings (such as from investment property like a rental house), plus child support or spousal support. When you consider job earnings, look at your take-home pay, after taxes, health insurance costs, retirement contributions, and other costs have been taken out. Don't include expected raises or bonuses in your money management plan, because they may not materialize.

Bills and Other Regular Commitments

Record all your monthly bills, including rent or mortgage payments, utilities, phone, internet service, car insurance costs, and costs of transportation. Don't forget about recurring costs that aren't bills. For example, if you go to your salon once a month, eat lunch out every day, or buy coffee every morning on the way to the office, write it down. When you know all the places you're spending money regularly, it's easier to know where to cut back if necessary. It's a good idea to record income and regular expenses together, either in a spreadsheet, or using online money management tools.

Short Term Goals

Short term goals include things like presents for children's birthdays, the costs of holidays like Thanksgiving and Christmas, and things like annual vacations or other expected travel. Once you know your income and expenses, you can set realistic saving targets for these shorter term goals and have a better chance of being able to afford them.

Health and Life Insurance

If you have health and life insurance through your employer, they'll be deducted from your paychecks. If not, plan for them in your budget. Divorce is a prime time to reconsider life insurance needs as part of your overall money management. If you're unsure of your post-divorce life insurance needs there are many online resources for helping you determine this, and there are also online calculators that can help. If you already have life insurance, re-examine your policy's beneficiaries after divorce. If you forget to remove your ex-spouse as beneficiary on insurance or retirement accounts, he or she will receive the settlement in the event of your death.

Long Term Planning and Retirement

Don't neglect long term financial goals after divorce. While immediate needs may be your top priority, abruptly canceling retirement account deposits can be short-sighted. You may, in fact, need to adjust long term goals or temporarily adjust retirement deposits, but it's best to do this with the help of a financial planner if possible. You should have a strict hands-off policy toward your retirement accounts, even if you have to suspend contributions. Retirement money should not be tapped unless financial catastrophe makes all other options unworkable.

Emergency Funds

If you do not have an emergency fund, start one. In an ideal world, you should have three to six months' living expenses set aside for emergencies, but even if this is not possible now, set aside as much as you can. Even having $1,000 put away can make an enormous difference to your money management plan if you face an emergency expense like a broken water heater or car repair. Like your retirement investments, you should have a hands-off policy toward your emergency funds except in an actual emergency. It's hard, but you'll thank yourself later.

Divorce is expensive, and post-divorce finances are often tighter. The pain of divorce may tempt you to splurge on a vacation you can't really afford, or a new wardrobe, but you should resist these temptations unless you're financially secure. Ideally, planning for post-divorce money management should begin before papers are filed, but it's never too late. By getting a clear picture of your income, expenses, short term goals, and long term goals, you set yourself up for a better financial situation long term. Post-divorce budgeting isn't exactly fun, but if you neglect smart money management, you'll only increase stress and prolong financial difficulties.

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