Managing money is something most of us will need to do, even if we don’t feel particularly confident about it. Keep in mind many of us did not learn about money in school so depending on how you grew up, if you had parents who freely talked about money in the home and encouraged you to manage your finances may be causing you a significant amount of stress. This is especially true if you have to deal with managing your finances for the first time as you go through the divorce process.
If you feel apprehensive about taking a closer look at your finances, you are not alone. According to the 2020 Financial Stress Index, Canadian’s rank money as their most significant stress in life. Anxiety around finances is top of mind for Canadians who have had their relationships tested and filed for divorce recently, with the myriad of financial pressures such as job loss and income disruption brought on by the pandemic. Read on for the Top 5 steps you can take to reduce your money stress and increase your financial confidence as you approach your life post-divorce as a single person.
It all starts with mindset.
Do you make the minimum payment on your desired card without opening your statement? Is there a part of you who really doesn’t want to know what your financial circumstances really look like? Were you someone who was not very involved in the financial decisions of your household? Ask yourself, what feeling are you attaching to managing your money? It’s up to you to change your mindset for the better.
Face the fear of doing the math around your debts, your income and expenses, and do it anyway! Even though it may feel scary to take a closer look at your finances, the good news is you have a starting point to grow from! Keep in mind you will not truly move forward with your divorce until you get a handle on where you and your former partner are financially. Another silver lining of checking in on your finances is it allows you to revisit your spending and determine how well it aligns with your priorities. Are you overspending on discretionary expenses such as online shopping? Can you afford it? Especially now that you will have to pay for your divorce on top of it. Now is the time to make the most of your income and set yourself up for a more solid future. Remember to pat yourself on the back on what you are doing well with your finances and where you need to improve. For example, you may earn a good income but feel most of it goes out the door before you know it. Knowing your numbers can create the kind of peace of mind that comes with having financial clarity so that you can put money leaking out of your pocket- to work.
Practise having money conversations.
The most important person you can have a money conversation with is yourself. Practise having money conversations with yourself regularly. Ask yourself what you want to see with your finances over the next 1 year, 3 years, 5 years, especially now that you are contemplating life on your own? What factors might get in the way as you navigate the divorce process? What steps can you take to get there, and who else should you be talking to about this? Keep in mind money conversations in a divorce typically include working with your ex-partner to negotiate the financial settlement. Your family lawyer can assist you in determining your economic entitlement in the divorce as it pertains to child support and spousal support. Factors that generally influence spousal and child support include how much income you earn relative to your spouse if you work outside the home and who will have primary custody of the children, to name a few.
Pay Yourself First
The reality is when it comes to being financially prepared is the future comes sooner than you think. Many of us learned the importance of a financial cushion in 2020 when a disruption income or job loss led to increased personal debt. It doesn’t have to be this way. To ward off the stress that comes with an unexpected drop in income or a financial expense that comes out of nowhere, pay yourself first. As you prepare to divorce, you will need to factor in ongoing legal fees in your budget. How will you pay for this new cost? Challenge yourself to set up automatic deposits on 10 percent of your income to improve your long-term financial security during your divorce and beyond.
Prioritize increasing your financial knowledge
Recognizing that you feel vulnerable about your finances, set a goal to become more financially resilient in 2021. As you go through the financial negotiations of your settlement, it may cause you stress recognizing that you were not as involved with the family’s finances as you should have been.
What do you want to learn about when it comes to finances? Can you take a course, buy a book or attend a workshop to find out more? Commit to learning something new each year around finances so that you can become more confident and less stressed when making money decisions when making financial decisions on your own.
What financial professionals do you need on your team? Depending on the complexity of your circumstances, you may need more than one financial professional to help you strategize around your finances. For example, the advice of a tax professional and certified financial planner is often a crucial step to take in your divorce settlement. A tax professional will help you minimize taxes on your divorce, and a financial professional will provide financial strategies to maximize your compensation. Advice from a CFP who specializes in divorce planning will prove to be invaluable as you finalize your divorce since they can give you insight on how to make most of your settlement and what steps to take to improve your long-term financial security. In fact, the stats around economic anxiety indicate that individuals who seek advice from CFP professionals report being less stressed during the pandemic compared to individuals who did not receive financial advice. Bottom line: to reduce your financial stress take action to improve your financial IQ sooner than later.
As a financial expert, a CFP can help you understand your financial situation and identify economic opportunities for you to reach the goals you might not be able to identify on your own. If you want to get started with a financial plan, book your complimentary 30-minute financial planning session with our team! We are here to help you on your financial journey as you build your financial fortune. www.askjackie.ca/contact-us