Failed relationships are an unfortunate though sometimes necessary part of life. With all of the emotional and legal aspects to deal with, the financial realities are sometimes placed on the back burner. This is a mistake.
According to a study from the 1999 Statistical Abstract of the United States, four times as many divorced women with children fall under the poverty line than married mothers do. This is a sad reality that hurts the parents and ultimately the children. The financial future of everyone involved is just as important as before and care should be taken to ensure it is preserved.
With a little research and careful planning both parties can become financially astute. After a divorce each party should put together a financial plan that includes the following five crucial steps:
- Take inventory of all assets and liabilities then create a monthly budget and stick to it. Before you can start to plan for the future, it is very important to know where you are in the present. After all assets and liabilities are accounted for create a manageable monthly budget to ensure the bills are paid and money is saved for the future.
- Develop an investment strategy specifically tailored to your risk tolerance and goals. Make 1, 5, 10 and 20-year financial goals for yourself. Then work backwards in order to develop the best method to achieve these goals. Work with a well respected, qualified financial advisor.
- Plan for your child’s/children’s education. As our most valuable resource and best hope for the future our children’s education is of the utmost importance. Make sure part of your investment strategy includes planning for your children’s education.
- Plan for your retirement. Nobody wants to work for the rest of his or her lives! Retirement is a process that takes years of planning. Make sure to include a portion of your monthly budget as well as incorporate part of your investment strategy towards this end.
- Family Support. The combination of child support and alimony. I believe that this is the most important financial decision each party enters into after a divorce. Make sure the parameters are fair and achievable to all involved. Failing to pay family support can have harsh financial consequences.
Creating financial stability is a proactive but not impossible process. Diligently following the parameters that you put in place will significantly increase the odds of achieving your financial goals.