Tips to aid financial recovery after divorce

Jamie Lima remembers his divorce six years ago as one of the most emotionally draining and financially challenging experiences of his life. As a result, he resolved to use his professional background as a certified financial planner to help other people going through similar situations.

“I want to make sure other people don’t step on the same land mines and be an advocate for them,” says Lima, founder of the Ramona, California-based Allegiant Divorce Solutions, a financial planning company that helps people going through divorce.

While the financial aspect of divorce is often overshadowed by the emotional impact, rebuilding finances after the dissolution of a marriage can be an integral part of overall recovery. Lima and other financial experts recommend following these steps to navigate the financial challenges post-divorce:

Adjust to your new cash flow 

A separation of finances after a divorce may mean you have to do more with less. “You want to start to look at, ‘If I walk away with half the assets and these are my income streams and this is my lifestyle, what will I have to do?’” says Erin Voisin, CFP and director of financial planning at EP Wealth Advisors in Torrance, California. The answer might be changing your spending habits and adapting to a new budget, she adds.

“Your whole timeline of your life might also have to change,” says Megan Kopka, CFP and founder of Kopka Financial in Wilmington, North Carolina. You might need to delay retirement or put off a career change, for example. “A lot of people are basing their mortgages and lifestyles on two incomes, so everybody has to reassess” following divorce, she says.

Rebuild your safety net 

Dominique’ Reese, CEO of Reese Financial Services, a financial coaching firm in Los Angeles, says many people also need to rebuild their savings after going through the financial shock of divorce. She suggests giving yourself microgoals to avoid feeling overwhelmed.

“Everybody’s financial situation is different, but you can start off with $100 and then let’s go to $300, then $500” and onward, Reese says. While it’s ideal to save three to six months’ worth of expenses, she acknowledges that amount is impossible for many people and says a smaller goal can be more motivating.

Build credit in your own name 

Opening bank accounts and credit cards in your name only, if you had not previously done so while married, is also a critical step, Voisin says, adding that it's also important to  save for retirement in your own account, update your real estate documents to reflect the correct owner, and update any beneficiaries listed on your financial and life insurance accounts. This multistep process can take months.

Post-divorce, it can also be a good idea to request your free credit reports to make sure they no longer list your former spouse’s accounts or accounts previously held jointly but no longer yours.

Get help from experts 

Given how complicated the financial aspect of divorce can be, sometimes turning to professionals can be worth the cost. “Before you hire your attorney, hiring a certified divorce financial analyst to help you with finances and a good divorce coach to guide you through the emotional aspect can help a lot,” Lima says.

A certified divorce financial analyst is trained in the financial aspects of divorce. The Institute for Divorce Financial Analysts can help you find one. Divorce coaches come from a variety of professional backgrounds and focus on helping clients achieve their goals for their post-divorce life.

Lima says consulting such professionals is something he wished he had done sooner when going through his own divorce because third-party input might have helped him make more rational, less emotional decisions around separating his finances.