Financial planning is rarely simple, but the challenges faced by divorced women make it even more complicated. Moreover, for perhaps the first time in many years, you are making difficult decisions completely on your own, without your previous sounding board. Still, you need to address these challenges.
Let’s dig deeper into each of these four issues.
The House: Keep or Downsize?
This is often one of the most painful decisions. For some, the house can be a source of pride and it may have a web of emotion attached; after all, this is where you raised your family. Unfortunately, the family house can be a noose around your neck. Cash flow must come first, even before the house. If you find that you can’t make your financial plan work because the house is starving your cash flow, move deliberately to downsize and get cash flow on track.
Your Career: Continue, Rejuvenate or Create
The length of your career is one of the two key levers you can control from a financial planning standpoint. Unfortunately, for divorced women, managing a career can be very complicated. If you have a career that you’ve been developing, that’s great, keep it going. If not, you may have to rejuvenate your career or create a new one, both of which can be difficult to do. This is especially difficult to do if you still have kids at home, since you may have to juggle their schedules or arrange for day care.
Cash Flow: Tracking Several Streams
Two-spouse families usually have one or two primary sources of cash flow. It’s easy to track and simple to forecast. However, now that you’re divorced, you not only have your own working income, but you may also receive a settlement in either a series of payments or a lump sum. You also may receive a certain number of maintenance and child support payments. The tricky part of these multiple streams is that they each may have a different time span, making it important to keep track of the inflows versus the outflow of expenses.
Spending: Managing Multiple Responsibilities
Spending is usually the most critical lever you can control to make your financial plan work. For divorced women, however, managing spending can be extremely challenging, especially if you are still responsible for children, since there can be so many demands on your budget. As painful as it can be, track your spending and do an annual check-up. If the amount differs from your original expectations – and it probably will – you may need to adjust the plan to make it work. If you see spending exceed your planned amount, move quickly to address the issue: either adjust the plan or rein in your spending. Don’t let excessive spending go on for more than a quarter or two without addressing the issue.
As you can see, none of these issues is easy. All are critical to making your financial plan work. So, address each challenge directly and move forward deliberately.