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. Maybe you didn’t have parents who freely talked about money in the home and encouraged you to as well. Managing your finances may be causing you a significant amount of stress. This is especially true if you are having to deal with managing your finances for the first time as you go through the divorce process.
If you are feeling apprehensive when it comes to taking a closer look at your finances you are not alone. According to the 2020 Financial Stress Index, Canadian’s rank money as their greatest stress in life. Anxiety around finances is top of mind for Canadians who have had their relationships tested and filed for divorce recently. There is a 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 a single person.
It all starts with mindset
Do you make the minimum payment on your desires 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? Ask yourself, what feeling are you attaching to managing your money? Its up to you to change your mindset for the better.
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Face the fear of doing the math around your debts, your income and expenses and do it anyway! It may feel scary to take a closer look at your finances… The good news is you have a starting point to grow from! You will not be able to truly move forward with your divorce process 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 gives you the opportunity to revisit your spending. You can determine how well it is aligning with your priorities.
Are you overspending on discretionary expenses such online and amazon while your credit card debt keeps you up at night? Now is the time to make the most of your income. Remember to pat yourself on the back on what your are doing well with your finances , and assess 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 actually create the peace of mind. One that comes with having financial clarity so that you can put money leaking out 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 on a regular basis. Ask yourself, what do you want to see happen with your finances over the next 1 year, 3 years, 5 years? What is getting in the way of you reaching your goals? 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 may include speaking with family who are involved in the decisions such as your ex partner who you will have to negotiate the financial settlement with. It will also include a family lawyer who can help you determine your financial entitlement in the divorce.
Pay youself first.
The reality is when it comes to being financially prepared, the future is coming 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 an increase in personal debt. It doesn’t have to be this way. To ward off the stress that comes with 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 in order 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 by increasing your knowledge around finances.
What do you want to learn about when it comes to finances? Can you take a course, by 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, you will likely need the advice of a tax professional and certified financial planner as you negotiate your divorce settlement. A tax professional will help you to minimize taxes on your divorce and a financial professional will provide financial strategies to maximize your settlement.
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 financial indicate that individuals who seek advice from 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.