Debt Advice: How to Cope When Money Leads to DivorceApr 21, 2017
Sometimes, debt advice from a professional can be necessary to help you keep on top of your financial obligations. After divorce or separation, it can be particularly important to seek advice about how to handle finances, split financial responsibilities or learn how to manage money on your own.
Money-related marriage problems
Couples who don’t agree on financial matters are more likely to experience conflict. In Canada, 59 per cent of divorcees report that money problems were a contributing factor in the dissolution of their marriage. Half of this group reveal that they weren’t aware of their spouse’s financial situation until they were already married. Seventy-three per cent admit that they would only consider marrying again if their partner had a good credit history. Unfortunately, only 35 per cent of couples discuss finances in detail before marriage.
How to repair your finances after divorce
Learning how to manage money on your own after divorce can be an intimidating thought — especially if you and your spouse combined your income during your marriage. However, by improving your financial literacy and learning how to take charge of your finances, you’ll feel more confident and independent in your new role. A few ways to begin might be:
- Use a budget. A personal budget can help you track your income, bills, and spending. It can also allow you to predict upcoming expenses and reduce debt. A mobile app may be the easiest and seamless way to start managing your everyday finances. Mint, by Intuit is an all-in-one app that allows you to track all your bank accounts, spending, bills and credit score in one place. Wally is another app that allows you to manually control each category of your monthly budget and track your finances.
- Start an emergency savings account. Speak to your bank about automating your savings and withdrawing a certain amount from your paycheque each month. It is a good idea to have three to six months’ worth of expenses put aside for any type of emergency.
- Speak to a financial advisor. Depending on the terms of your divorce or separation, your RRSPs or pension may have been affected. Talk with an advisor about how to make up for lost funds and get a new picture of what retirement will look like. This may mean working longer or adding more of your money into retirement investment funds.
How to identify potential problems
Divorce and separation are costly. After all your assets have been split, you may be left struggling to pay the bills. Further, if you are receiving child support or alimony, that is classified as a taxable income which can mean money owed at tax time. On the flip side, if you are the one paying child support or alimony, you may also be left short and wondering how to get by. Some individuals are tempted to opt for declaring bankruptcy after divorce to resolve their financial obligations, but the fact is that bankruptcy only wipes away consumer debt. It’s best to consult a Licensed Insolvency Trustee (LIT) if you are thinking about declaring bankruptcy. The reality is that bankruptcy may be necessary in some situations, and can provide overwhelmed individuals with a fresh financial start. However, there is a cost to file for bankruptcy, and it will affect your credit rating for seven years after filing. An LIT can also provide debt advice and help you explore other ways to reduce your debt, including debt consolidation, credit counselling or filing a consumer proposal — a popular alternative to bankruptcy.
Are you looking for debt advice to deal with money difficulties following a divorce? Compare your debt options with a repayment calculator or watch this video to learn more about the services provided by an LIT here.
You can also connect with others who may share your situation by searching the Twitter hashtags #LetsTalkDebt #BDODebtRelief