Loss of a job or a health crisis are unexpected life events that can cause long term financial strain. However divorce is another event that can create severe financial hardship for an individual. There are some things that every divorced person should do to protect their financial health.
First, close all joint accounts after a divorce. Unclosed accounts can lead to unexpected financial liabilities. For example, a joint credit card that remains open can leave an un-suspecting ex with credit card debt that he or she did not create. When the joint accounts are closed, it may be helpful to open one new account alone. If a newly single individual lacks an emergency fund, the credit card could serve as a temporary financial bridge. As soon as possible, newly single adults should start a cash safety net for emergencies.
One of the hardest parts about uncoupling is re-creating a life away from a spouse. This new life will require that the beneficiary on all accounts be changed so that a previous spouse does not remain on any policies. Personal insurance coverage should also be updated to reflect a change of assets that may have occurred during the course of the divorce.
Financial advisors report that both rich and modest income clients worry about being able to retire after a divorce. The average divorce takes at least a year before it becomes finalized. After this year some individuals want to take a break from any and all paperwork that deals with finances. This can lead to financial peril that could leave debt unchecked. When this happens, bankruptcy may become the only viable option for debt reduction. A bankruptcy attorney can advise potential petitioners of the best legal course.
Source: www.dailyfinance.com, “22 Tips to Transform Your Financial Life After a Divorce,” Robert Pagliarini, July 28, 2014