Your 5-Step Guide to Financial Freedom After Divorce, From a Financial Planner
Living on one income after a divorce can be deeply overwhelming, particularly if you've never had to manage household finances. But these five steps make it possible — and liberating.
Going through a divorce can be one of the most financially overwhelming experiences in a person's life.
Having to cover everyday essentials, such as rent, a mortgage, health care or even groceries, on a single income can feel daunting — but it doesn't have to.
For more than 25 years, I have dedicated my life to helping women successfully transition from married life to being financially independent — from overwhelmed to empowered —and I am here for you.
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My heart is so full knowing that you are reading this article. This means that you love yourself enough today to want to protect the future you by making sure that you are financially safe in 20, 30 or even 40 years from now. I am going to help you do just that.
In preparation for writing this article, I reflected on the most important information I have learned from working with hundreds of women over the years.
None of my clients has the exact same financial situation, but what all these women have in common is that they followed my five financial freedom steps and are living a full and financially secure life now.
This step-by-step guide gives you the tools you need to clarify what sustainable spending looks like for you, how much you need to save, how to make thoughtful housing decisions and more.
With this knowledge, you will have financial confidence, security and the peace of mind you deserve. Let's get started.
Step No. 1: Understand your new financial landscape
If you want to build a secure future after divorce, the first step is to gain a clear picture of your current financial situation.
Start by gathering key documents, such as bank and credit card statements, retirement accounts, mortgage information, insurance policies and all records of your assets and debts.
The next step is to create your post-divorce balance sheet, detailing your assets and liabilities. Seeing everything together allows you to assess where you stand financially and answer questions such as:
- Do I have enough cash in a bank account to fund at least three months of my expenses in the event something goes wrong?
- Do I have sufficient investments to fund my retirement, or do I need to start saving more?
- How much of my total net worth is wrapped up in real estate and does this leave me at risk?
This work will change your life. Suzanne, who has been a client for two years, told me that organizing her finances after her divorce was like "turning on the lights in a dark room." Once she knew exactly what she had, she felt empowered to take the next step and live her best life.
Step No. 2: Build a realistic budget on a single income
Once you have a clear picture of your assets and liabilities, the next step is to get clear on your expenses.
Knowing what you spend is part of the foundation you need to make confident, informed decisions. To make this easier you can use online tools such as Quicken, YNAB or Empower.
If you are a pen-and-paper person, take out your year-end credit card and checking account summaries. These statements are typically sent to you in January each year, and every expense will be listed, and often categorized, for you.
I just completed a full picture of my spending. This project took me a total of eight hours, and I tackled it by committing to waking up an hour earlier.
For two weeks, on Monday, Tuesday, Wednesday and Thursday, I worked uninterrupted for an hour, before the day took over and distractions stole me away.
After two short weeks, I could see where every nickel and penny have been going, and my eyes nearly popped out of my head.
Review your essential expenses: Housing, health care, transportation and groceries. These non-negotiables ensure stability, and once those are covered, you can look at what remains for discretionary spending, such as dining out, vacations or hobbies.
Many women are surprised by hidden expenses, such as unused subscriptions or automatic renewals, that can be eliminated easily. We also often lie to ourselves, saying things like, "I don't eat out that often!"
Numbers do not lie, and while this was a sobering experience, I feel more in control — and so will you.
Better yet, I upped my monthly savings because I was able to reduce my spending by more than $2,500 a month.
Step No. 3: Housing decisions — keep, sell or rent
Housing typically represents the largest expense after divorce, and it's also one of the most emotionally charged decisions. Whether you choose to keep your home or sell it, this deeply personal choice will have the biggest impact on how you manage life on a single income.
While keeping the marital home can provide a sense of comfort, particularly with children involved, it's important to consider the long-term financial consequences.
In my Kiplinger article Getting Divorced? Beware of Hidden Tax Traps as You Divide Assets, I shared a story about a woman who chose to retain the primary home. When she eventually sold it years later, after realizing she could not afford it, she was caught off guard by a significant tax bill that could have been avoided with better planning.
No one wants to be house-rich and cash-poor. A good rule to follow is that no more than 30-35% of your expenses should be spent on housing. This includes rent, mortgage, real estate taxes, maintenance and upkeep.
For many women, like Debbie, opting to downsize or rent offered both financial relief and emotional liberation. After our financial analysis showed that taking the home would drastically reduce her standard of living, Debbie moved into a smaller apartment that not only halved her expenses but also provided the fresh start she hadn't realized she needed.
Step No. 4: Protect your retirement and long-term security
It's essential to review your brokerage and retirement accounts, ensuring that rollovers and transfers detailed in the divorce agreement are executed correctly. We often catch significant errors that could cost tens of thousands of dollars.
I recently shared the story of a new client who was shocked to receive a $41,250 tax bill after selling investments from her divorce settlement. Had she reached out to us before, that unpleasant surprise could have been avoided.
Next update the beneficiaries on each account, ensuring your assets pass to the important people in your life, instead of your ex.
Finally, pull out the balance sheet that you created in step one. Add up the value of all your investments and multiply this by 4% (0.04). The resulting value is the dollar amount you can sustainably withdraw annually from your portfolio once you are retired.
Assuming that your investments are working for you in a broadly diversified portfolio allocated evenly between stocks and bonds, your portfolio should last you up to 30 years or longer.
If the dollars you can safely pull from your portfolio are not sufficient, take stock of any additional income you can expect in retirement such as Social Security, a pension or rental income.
If the sum of your income from all sources including your investments does not cover your yearly expenses, you need to start supercharging your savings now.
Contribute to accounts that will be used to fund your retirement. Experts agree that you should work up to saving 15% to 20% of your annual income to ensure that you have enough assets to fund your golden years and beyond.
If you find that there is nothing left to save at the end of the month, go back to step two, where we captured your spending. Review your expenses with a fine-tooth comb like I did. I know that you will find some wiggle room that will help you on your way.
Step No. 5: Build confidence and financial independence
Managing finances after divorce goes beyond mere numbers — it's about reclaiming your sense of independence. Every small action you take, whether it's paying off a credit card or contributing toward your retirement, will add to your confidence and forward momentum.
Over time, these steps answer the question so many women ask: How can I afford to live alone after divorce? The truth is that by breaking it down into manageable steps, you can.
I've seen countless women transform their fear into strength throughout this journey. One client shared that investing her cash from the divorce in her own investment account was the moment she truly felt free.
Another said that after six months of living on her new budget, she felt confident enough to pursue a new career path despite taking a pay cut.
Achieving financial independence after divorce is not only attainable, but also incredibly empowering. You can do it.
Conclusion
So, how can you afford to live alone after divorce? The key lies in taking this five-step approach to your finances.
By clarifying your financial situation, establishing a budget, making thoughtful housing decisions, safeguarding your retirement and steering clear of common pitfalls, you'll set yourself on the path to confidence and independence.
If you're ready to take the next step, I encourage you to download our free divorce guide, Unveiling the Unspoken Truth® – The Financial Challenges Women Face During and After Divorce, and reach out to us for a free consultation.
With the right support, living alone after divorce can be not just manageable, but liberating.
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