The cost of divorce: 8 ways to get your finances back on track

No matter how well-planned or amicable, divorce is expensive. It’s emotionally demanding and with all the changes happening at once, looking after your financial health often gets put on the back burner.

While it can certainly be overwhelming, there are quite a few things you can do to start getting your finances back on track. And with 41% of marriages in Canada predicted to end in divorce, know that you’re not alone in this.

Here are eight ways to get your finances in order post-divorce:

This is something we should all be doing regularly, but it’s particularly important before and after a divorce. Taking stock of what you own and what you owe is the basics of tracking your net worth. In addition to giving you a big picture view of where you stand financially over time, it also shows you what you’re currently responsible for.

During your marriage it’s likely you had a few shared assets and debts (a house, a mortgage, a car loan, etc.), and that those have since been divided. Getting clear on what you now own and owe separately helps you see exactly what assets you have and can use, and what debts you have and are responsible for paying.

Another thing that we should all be in the habit of, monitoring your credit report and score is vitally important post-divorce. Your credit report will show a list of every source of credit that has your name on it and that you’re therefore responsible for, while your credit score will show how your credit “worthiness” has changed over time.

You’ll want to keep checking your report to make sure that any joint sources of credit that needed to be closed were, that your name isn’t still on any credit it shouldn’t be, and that there’s no overdue balances you don’t know about. If you notice any inconsistencies or things that need updating you’ll want to deal with those right away.

Whether you have a long-standing personal credit history or you’re just starting to build your own credit, keep monitoring your score after your divorce to try and keep it in a healthy range. If you’re looking at getting a loan of any kind (mortgage, credit card, car loan, etc.) your credit is important and will influence the interest rate you’re able to get.

Your budget will likely be where you feel the biggest immediate financial change after a divorce. Your living arrangements change, and expenses that were once shared (mortgage, rent, bills, groceries, etc.) you’ll now have to cover yourself.

List out all the monthly and annual expenses you’re now responsible for covering, savings and investment contributions, and any debt repayments you need to make. If you’ve never made a budget before here’s a handy budget calculator you can use. There will undoubtedly be a transition period where your expenses feel all over the place, but focus on levelling those out when you’re able.

It’s a good idea to go over your budget before you make big lifestyle choices like buying a new home or signing a new lease (or choosing to keep your existing one). Do a mock budget to check that you have enough income to cover those expenses so that you don’t get into a situation where you can’t avoid your lifestyle.

In addition to sharing month-to-month expenses, there’s a good chance you were sharing short-term and long-term savings, too. Look at your retirement goals and accounts as well as any other savings goals you now have (buying a house, buying a car, going back to school) to get a clear picture of what you’re working towards.  

Don’t stress if you need to change the time horizon on some of your goals or adjust how much your putting towards them each month, the important thing is that you’re still committed to your financial future.

You may be carrying some debt from going through the divorce or needing to cover transition costs, and there’s no shame in that. Try to stay conscious of your spending and keep those unexpected costs to a minimum where you can. Most importantly, have a plan to pay it off so that this debt is just a phase, not a lifestyle.

Use a line of credit instead of a credit card to keep interest costs down, look into consolidating if you need to, and make sure you have debt repayments factored into your monthly budget. You may have to hold off on some of your savings goals until you have the debt repaid and that’s OK. You’ll get back on track!

Now that you’re solely responsible for taking care of your household, it’s important to make sure that you have the proper insurance in place (especially if you have dependents like children or parents).

If you’re employed and don’t have disability insurance, now’s a good time to get that in place so that you know your income is protected. If you can’t work you won’t be able to fall back on your spouse’s income to cover the bills, so having disability insurance will give you peace of mind. If your life and health insurance was covered under your spouse’s plan, you’ll need to look into getting your own coverage.

Go through all of your investment accounts and insurance policies to make sure your beneficiaries are up to date. You’ll also want to update your will (or create one if you don’t have one!). Remember that getting a divorce does not invalidate your will, so you need to update your estate planning wishes.

Whenever you go through a major lifestyle change—whether that’s a divorce or a new job in a different city—it’s important to update your financial plan to make sure you’re still on track. A proper financial plan ensures that you and your money are taken care of, and that you’re building towards the future you’re dreaming of.