Dealing With Divorce or Separation: How to Rebuild & Heal Financially

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In 2022, more than 2 million Canadians were legally divorced. Emotions run high during a divorce, and the financial aftermath can sneak up on you. Amidst the turmoil of separation, rebuilding and healing financially often feels impossible, scary, and like you will never recover.

This guide explores practical strategies and insightful advice to help you regain control of your financial well-being after separation. From budgeting and managing debt to understanding the tax implications and rebuilding credit, our aim is to provide you with a roadmap towards financial recovery, empowerment, and peace of mind. 

Key Takeaways

• Grant yourself time for emotional healing before tackling financial tasks post-divorce.
• Seek support from professional resources like divorce support groups, financial well-being advisors, and legal counsel.
• Establish new financial routines to adapt to post-divorce life.
• Gather financial documents, assess income and expenses, and review assets and debts to understand your financial situation post-divorce.
• Avoid impulsive decisions, conflicts, and neglecting financial planning during separation or divorce.

Give Yourself Some Time

Admin and financial matters can feel overwhelming or even meaningless after experiencing the emotional toll of divorce. That’s why it's perfectly acceptable to grant yourself a well-deserved break before diving into these challenging tasks. 

Taking this time to focus on self-care and emotional healing can ultimately better equip you to tackle the practicalities of rebuilding yourself financially. Remember, it's okay to take things one step at a time and to seek support when needed as you navigate this transition. 

Ask For Help

Dealing with divorce can amplify feelings of loneliness, especially when you add on the stress of managing financial matters alone. Seeking support, whether professional or personal, provides invaluable assistance during this challenging time. 

Here are some resources for professional support:

Divorce Support Groups

Joining a divorce support group helps connect you with others who are going through similar experiences. Sharing your feelings and experiences in a supportive group setting can help alleviate loneliness and provide a sense of community.

Organizations like DivorceCare offer in-person and online support groups specifically designed to help individuals navigate divorce-related challenges.

Financial Well-Being Advisors

Consulting with a financial well-being advisor or planner can provide valuable guidance on managing your money post-divorce. They can help you create a financial plan tailored to your individual circumstances, alleviate money-related stress, and empower you to make informed decisions.

One of these advisors is Parachute. The platform offers financial well-being and debt consolidation services, aiming to alleviate the financial stress that often accompanies divorce. If you’re struggling with debt post-divorce, Parachute may be the empathetic, well-being focused solution that you need.

Legal Assistance

If you're facing complex legal issues related to divorce, seeking the assistance of a qualified family law attorney is essential. They can provide legal advice, advocate on your behalf, and ensure that your rights are protected throughout the divorce process.

If you’re struggling to find the right legal assistance, local bar associations or legal aid organizations may offer resources for finding reputable attorneys in your area.

Build & Maintain Routines

Your routines (both financial and otherwise) are probably turned upside down. It’s important to notice these patterns and work towards building and maintaining new routines in order to regain stability and control over your financial situation. 

A common mistake that individuals make after a divorce is trying to keep the same routines that they had before. This is true in the personal finance domain, but also in other areas of your life post-divorce. Divorce is a big life change, and you’ll need to slowly incorporate new routines that work for your new phase of life.

Here are some steps to help you establish new budgeting and financial habits:

Track Your Spending

Monitor your spending habits closely to ensure that you stay within your budgetary limits. Consider using budgeting apps or software to track expenses automatically and identify areas where you can cut back or reallocate funds. 

This is especially important if your spouse used to take care of your finances or played a big role in your income. Take the time to get to know your spending habits as you begin to adjust to a new lifestyle.

Automate Savings and Payments

Set up automatic transfers to savings accounts or investment accounts to make sure that you consistently save a portion of your income. You can also consider automating bill payments and debt repayments to avoid late fees and maintain a positive financial track record. 

After a split, you’ll want to ensure that you have an emergency fund and are taking good care of your credit score. Automating your savings and payments can help contribute to both of these goals.

Practice Self-Care and Stress Management

Recognise the emotional toll that divorce can take and prioritize self-care practices to maintain your overall well-being. Activities like exercising, meditating, or spending time with loved ones can reduce stress and promote relaxation. Approaching your finances from a place of reduced stress can have enormous benefits on your decision-making and your ability to reach goals.

Find Out Where You Are

Divorce often leaves one or both of the people involved in completely unexpected financial situations. That’s why you want to get a clear view of where exactly you are financially during and after the divorce.

Tips to help you do this include: 

Create a Post-Divorce Budget

Develop a budget that reflects your current financial circumstances and future needs. This will help you understand your expenses and monetary obligations.

Close Joint Accounts

If possible, close any joint accounts shared with your ex-spouse to avoid potential financial complications. Open new accounts in your name as soon as possible to maintain financial independence.

Educate Yourself

Learn about financial matters related to divorce, including your rights, responsibilities, and potential pitfalls. This knowledge will empower you to make informed decisions.

Financial Preparation Checklist for Divorce

Preparing for divorce involves various financial considerations to navigate the process and establish a solid foundation for your economic future.

Here's a checklist to help you stay organized:

Compile Financial Documents

Gather all relevant financial documents. These could include bank statements, tax returns, investment accounts, retirement account statements, and mortgage documents. You want to make sure you collect any records related to debts or assets acquired during your marriage.

Assess Income and Expenses

Determine your current sources of income and evaluate your monthly expenses. Take note of any changes in income or expenses resulting from the divorce. These changes could include things like alimony or child support payments, changes in living arrangements, or adjustments to insurance coverage.

Review Assets and Debts

Take inventory of your assets and liabilities. You want to look at your bank accounts, investments, real estate, vehicles, and outstanding debts, which could include things like mortgages, loans, and credit card balances.

You also want to determine the value of marital assets and liabilities acquired during the marriage, as well as any separate property that may be excluded from the divorce settlement.

Understand Legal Obligations

Familiarize yourself with the terms of the divorce decree or settlement agreement. Ensure that you understand any financial obligations or responsibilities outlined in this agreement. This may include provisions related to spousal support, child support, division of assets, and debt allocation.

Evaluate Short-Term and Long-Term Goals

Assess your short-term and long-term financial goals in light of your new circumstances. These might include paying off debt, saving for retirement, purchasing a new home, or funding education expenses for yourself or your children.

Update Beneficiary Designations

Review and update beneficiary designations on life insurance policies, retirement accounts, and other financial accounts to make sure that they reflect your current wishes and circumstances.

Protect Your Credit

Monitor your credit report regularly to detect any unauthorized activity or discrepancies. This is where freezing joint credit accounts or closing joint credit cards (if possible) can help to prevent additional debt accumulation during the divorce process.

Plan for Child Support and Alimony

Understand your rights and obligations regarding child support and/or alimony (spousal support). Determine the amount of support you may be entitled to receive or required to pay based on your financial circumstances and relevant provincial laws.

Update Estate Planning Documents

Review and update your will, trust documents, and powers of attorney and other documents relating to your estate. By doing this, you can make the necessary changes that reflect your current wishes and designate new beneficiaries, executors, and agents.

What Not To Do During a Separation or Divorce

During a separation or divorce, it's essential to approach the process with caution and mindfulness to protect your interests and well-being. 

Here are some important things to avoid during this challenging time:

Engaging in Conflict or Arguments

Avoid escalating conflicts with your spouse. This will likely prolong the divorce process, increase emotional stress, and lead to unnecessary legal fees. Instead, you should strive to communicate calmly and respectfully, especially when discussing important decisions or parenting matters. It may even be a good idea to work with a mediator or third-party if you’re finding it difficult to communicate clearly.

Making Impulsive Financial Decisions

Refrain from making impulsive financial decisions out of anger or frustration. Avoid selling assets, making large purchases, or draining joint bank accounts without careful consideration and consultation with a financial advisor or attorney.

Withholding Information or Assets

Be transparent and honest about your financial situation. Avoid hiding assets, income, or debts from your spouse or legal officers, as this can lead to legal consequences and undermine trust in the divorce proceedings.

Violating Court Orders or Agreements

Respect court orders and agreements related to custody, visitation, child support, alimony, and property division. Violating these orders can result in legal penalties and damage your credibility with the court.

Neglecting Self-Care

Amidst the stress of separation or divorce, it's crucial to prioritize self-care and emotional well-being. Divorce can be a long, stressful process, so put routines and boundaries into place to help you remain steady.

Ignoring Legal Advice

Seek guidance from a qualified attorney specializing in family law. Avoid making significant legal decisions or agreements without consulting legal counsel, as they can provide invaluable advice and advocate for your rights throughout the divorce process. Making rash or uninformed decisions can lead to serious consequences down the road.

Disregarding Financial Planning

Don't overlook the importance of financial planning during and after divorce. You want to prioritize creating a budget, updating estate planning documents, and securing your financial future with the guidance of financial professionals. Start thinking about your finances and your post-divorce plans as soon as possible during the process.

Isolating Yourself

While it's natural to feel overwhelmed during a separation or divorce, avoid isolating yourself from friends, family, or support networks. Seek emotional support from trusted individuals who can provide empathy, encouragement, and practical advice.

How can I afford to live on my own after divorce?

Affording to live independently after divorce can be challenging, especially if you were once financially dependent on your spouse. Everyone’s circumstances differ, but following these steps can help you navigate your post-divorce living situation:

• Negotiate fair spousal support or child support arrangements.
• Create a new budget to understand your financial situation.
• Explore options for downsizing or finding more affordable housing.
• Increase your income through employment or side gigs.
• Seek financial assistance through government programs or support from family and friends.
• Build an emergency fund to cover unexpected expenses.
• Consider financial well-being companies to help you improve your economic stability. 

Learn how Parachute can help you improve your financial well-being after divorce today!