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Article written by Jackie Porter
There is another pandemic that has been afoot since the start of the coronavirus – the rise of the pandemic divorce. The increased pressure, amidst struggling to cope with a loss of income may have led to many couples choosing to pull the plug on their relationship. Recognize that it’s never easy to end a relationship. It can be even more challenging to decide to separate in the middle of a pandemic. How can you financially recover after a messy separation and financially recover sooner rather than later in a pandemic? Read on how to make a financial fresh start after deciding to divorce in a pandemic for 2022.
You Are Not Alone
As the divorce rate surges during the pandemic, know that you are not alone. Maybe the reason you have taken this long to end the relationship may have to do with finances. Especially when Covid-19 created financial uncertainty for many people. The good news is that vaccines have certainly helped the economy to reopen and begin to recover. As you start the divorce process, it’s time to think about your long-term financial recovery as well.
Why Understanding Your Household Debt Matters
Improving your chances of financial health starts with taking a closer look at the amount of debt you and your ex are carrying as you start the divorce process. Keep in mind your family’s net worth- and what you will be walking away with after your divorce is settled. This will ultimately be determined by the assets left over after debts are paid. In addition, if you have personal debt, you will need to figure out how you will continue to pay your personal debts without having a partner to fully share the expenses with. What is the value of your home and how much is the mortgage? What do you and your soon-to-be-ex owe on credit cards and personal loans? Do you know the interest rate on each of the debts you are carrying? Now is the time to get the family’s finances in order.
Check-In On Your Credit Score
Do you know your credit score even before the pandemic? Remember without a healthy credit score of 650 or higher it will be challenging to finance a new home or even rent an apartment after your divorce. Knowing your credit health is crucial for you to be able to build or rebuild your finances in 2022. Check out websites like Credit Karma or Borrow well to obtain an instant credit report. Remember checking your personal score won’t affect your rating.
Has Your Credit Score Changed Since the Pandemic?
If you and your partner fall behind on paying the bills or mortgage while you began the divorce process your credit score may be affected. You will need to think through how you managed your relationship with the bank at that time. Keep in mind that the lockdown prevented many people from being able to work. Which means you were not alone in struggling to pay the bills on a limited income.
For example, many banks offered a mortgage deferral program that allowed mortgage holders to defer payments for up to 6 months in the early days of the pandemic. Assuming you qualified for the program, missing up to six months of mortgage payments would not impact your credit, and principal and interest payments would simply be added to your mortgage term. The crucial step to take here is to check your credit to ensure any deferral program you negotiated has not affected your credit score after the deferral period ends. You will also want to confirm the information on your profile is accurate and up to date- especially as credit card fraud escalates.
Shop Around for Lower Interest Rates On Your Debt
Perhaps you have been juggling household debt since before the pandemic and this debt has made it hard for you to separate, out of fear of what it might look like to financially go it alone… If a straddling mounting debt is something you will need to address as a couple or on your own as you move forward with divorcing during the pandemic – now is the time to shop around for lower interest rates on everything from loans, lines of credit, and credit cards. Keep in mind interest rates are at all-time lows since the pandemic assuming you have a decent credit score.
Commit to Getting Out of Debt for 2022
Many people found a new favorite pastime during covid- mindless shopping online. Especially as they struggled with coming to terms with ending a long-term relationship with their partner. Unfortunately, like mindless eating, mindless shopping could have long-term consequences on your financial health. Create a plan to pay off debt especially high-interest debt sooner rather than later. Commit to getting out of debt and turning the page on high-interest debt in 2022.