Navigating Divorce and Finance

While divorce is never easy, thoughtful planning can help ease some of the pain. Here are key things you can do to keep on track while transitioning to your new financial life.

1 CREATE A BUDGET Track your expenses, figure out how much you need to cover essentials and identify where you can make cuts. For example, by not eating out as frequently, you might be able to save $30 or more a week.

2 PRIORITIZE YOUR SAVINGS With your budget in place, calculate how much is left for savings, and set priorities.

• Stockpile an emergency fund that covers bills for at least six months – or, better yet, have two to three years worth in cash or short-term investments.
• Make regular retirement fund contributions. Be sure to take advantage of an employer’s matching contributions—otherwise, you’re throwing money away.
• Save for your kids’ college tuition.
• Sock away money for a vacation, entertainment and other splurges.

3 MAKE SAVINGS A HABIT Pay yourself first with every paycheck by contributing to your savings account. The easiest way to do so is with automatic deductions.

4 CAPITALIZE ON COMPOUNDED INTEREST Albert Einstein called it the “eighth wonder of the world.” Put your money in accounts paying interest, leave it there and watch your money potentially grow. Michael convinced his children to start saving with an example like this one: If a 20-year-old saves $30 each week, that adds up to $1,560 a year. With a 6% annual return, just that one year in savings will grow to $21,472 by the time they’re 65. If you continue to make annual contributions of $1,560 for the next 45 years, you would have the potential for a grand total of $373,265.47 minus fees and other investment-related charges. Keep in mind that your results will vary. The hypothetical rate of return used here isn’t guaranteed, and the example isn’t representative of a specific situation. And remember, all investing involves risk, including the potential loss of principal.

5 PAY OFF CREDIT CARD DEBT EVERY MONTH Paying high interest rates on your balance is money you could otherwise be investing. 6 SAVE YOUR RAISE Painful as it may seem, one way late starters can play catch-up is to put most of that extra money into savings. For Michael, a lifetime of disciplined savings will come full circle when he retires this summer. As he travels the country in his energy-efficient camper van, the frugal doctor will be living out his motto: Worry now, relax later.

This article was prepared by Broadbridge Advisor Solutions.