How to bounce back financially after a divorce

Although divorce settlements are intended to be as equitable as possible for both parties, it’s almost inevitable that at least one side will experience some level of cash crunch once the final papers are signed and they begin life on their own. Taking care of your finances after a divorce can be discouraging, especially if your former partner was primarily responsible for money matters during your marriage.

By following a few steps and guidelines, you can manage your finances as a single person in ways that will keep you solvent—and potentially even bring about new sources of income. Here are some of these tips.

Set small goals and rework your budget.

Emerging into a post-divorce financial landscape is intimidating. That’s why navigating it with a progressive, deliberate approach is the best way to handle it. Don’t place yourself under huge directives, like paying off your entire credit bill or putting a down payment on a house immediately. Start small.

Downsizing is always a great way to start. Some cuts may be painful, but they likely won’t be as difficult to endure as the final months of ending a marriage. Contact utility or service companies to reduce monthly usage plans and bills. Slow down or completely stop your discretionary spending for a time.

Make a plan to deal with debt.

Divorce settlements split existing debt between the two parties. Be fully educated as to what your specific responsibilities might be. Contact your existing creditors to make repayment plans. In many cases, companies will be willing to adjust considering the circumstances you face, especially if you and your former spouse were consistent with creditors during your marriage.

Build your own credit.

To that end, it’s vital to re-establish credit in your name only once the divorce is settled. You don’t want encumbrances that might come with your ex-partner’s credit history, and you need to build up your financial profile separate from them. Find opportunities to responsibly open credit accounts in your name only and be extra mindful of your monthly payments. Be sure to monitor your individual credit score as well.

Change your tax withholding.

Married couples who file joint tax returns usually pay a lower tax rate, which affects the amount of money that’s withheld from their paychecks. After they divorce this rate usually goes up for each partner. If you forget to update your employer about your new status as a divorced person, you may get hit with an unwelcome surprise at tax time if you continue to pay the lower married rate. As soon as possible after your divorce, file a new W-4 form with your employer to change your tax status to a single person.

Manage your health insurance.

Your divorce agreement should outline how you and your former spouse maintain medical insurance. If your spouse gets coverage through their work, they may agree to continue paying for your children’s care (or even yours). You may be able to continue coverage under an existing COBRA plan. Or, alternately, you may have to line up continued medical coverage on your own.

The point is to be completely aware, down to the last detail, of your post-divorce health insurance situation. You may be responsible for new payments under the COBRA plan or may have to facilitate new coverage under your own employment. Especially if you have children, be entirely familiarized with what you need to do to keep health coverage intact.

Look for ways to increase income.

Your post-divorce cash flow will probably be less than it was during your marriage. If you still feel a crunch after downsizing, consider ways to generate more cash on your own. There are many creative ways to get this done: taking on a new side job; funneling personal interests like crafts or computer work into a new online business; participating in paid focus groups; or asking your boss for a cost-of-living wage increase. Take a broad-minded view about making more money—you may well find opportunities you never expected.