I know of a divorcing 40-year-old woman who hasn't the first idea how to calculate her income and expenses to create a budget because it's always been handled by her parents and husband. She calls her soon-to-be ex-husband in a panic almost every day because she has no idea how to make sense of simple financial matters.
Even if this closely describes your situation, you can still learn all that you need to know to become a proficient manager of your personal funds.
Man or woman, a language you need to speak as you divorce is the language of money. There was a time following my divorce when I was learning even the most basic of concepts. It has a steep learning curve, and learning something new can be challenging and overwhelming. I'm going to give you the basics so you know where to start. If you don't have this basic knowledge, and you run into someone who wants to sell you their financial product or services and doesn't have the best of intentions, you can make mistakes that would have been avoidable.
Full disclosure: I'm not a financial advisor, attorney, CPA or bookkeeper, but I have my own team and I find them invaluable. I didn't need a team when I had debt, a non-profitable business, and no assets. However, as I've grown, so has my desire and need to have the professionals on standby who know what to do with someone in my situation.
You first need to do your homework and learn the lingo -- this is the very least you need to know. Then, you need to enroll yourself in a self-learning program where you seek out new information so you can make informed, educated decisions. At first, you'll make these decisions on your own, but eventually you'll have a reserve of capital and can assemble a team of professionals to help determine your options.
Basic Financial Vocabulary
Your Monthly Nut: you may refer to it as your budget. I personally don't like the word budget because to me it's limiting. It just doesn't have a good feeling about it. Your monthly nut is a comprehensive list of your post-divorce monthly expenses. In other words, how much does it take for you to keep your current lifestyle fully paid for without incurring debt or borrowing from your savings? For right now, this is everything on your personal net worth calculator (if you need one, use any search engine to find one). It's helpful to flush this out as you're in the process of your divorce and want to calculate a good settlement.
Assets: This term refers to how much you will still own, have in your personal savings and in investments, including valuables, property, businesses and monies owed to you, after your divorce is final.
Liabilities: This is everything you owe -- mortgages, car loans, student loans, personal loans, credit card debt, etc. If you still owe it when the divorce decree is signed, it's a liability.
Net Worth: Subtract your liabilities from your assets and that is your net worth.
What if your number is negative? Well, then zero is the first goal -- to owe nothing and be on the way to having a positive number in the assets category.
Needs vs. Wants
What's the difference between a need and a want? Only you can determine this, but the real needs you have are food, clothing, transportation and shelter. What you need is the amount to cover your bills on a monthly basis. Create a spreadsheet that includes everything you know you owe on a monthly basis, and be sure to add in kids' expenses, food, gas, insurance, cell phone and any other recurring expenses. I also suggest adding in a small amount for unexpected miscellaneous expenses.
What if your car breaks down, you need a new pair of shoes and your kid takes up playing the clarinet and needs an instrument and other equipment? Or, you have the opportunity to attend someone's wedding or birthday party? If you don't have an abundance of funds, there's no abundance of fun! Be sure to add "savings and investments" to your budget. This may require that you scale back in other areas to ensure you have the capital you need when you need it. Be sure to save each and every week or month (as your pay schedule permits), even if it's just $5. You'll feel better knowing you can lay your hands on some cash if and when you need it.
If your divorce means this is the first time you have cared for your financial self, seek counsel with individuals and professionals you can trust. Your therapist or divorce attorney is a great place to start, they are usually connected with financial advisors who specialize in working with men and women in transition post-divorce.
Honorée Corder is an executive coach, personal transformation expert, and the author of "The Successful Single Mom" book series and the new "The Successful Single Dad", all written for single parents who want to create an amazing future, available at Barnes & Noble, Amazon.com, Smashwords.com and on iTunes. She also created the Single Mom and Single Dad Transformation Programs. Visit thesuccessfulsinglemom.blogspot.com for more information .
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