This is a guest post by Cameron. If you want to guest post on this blog, check out the guidelines here.
After a divorce, you may be left with a hefty chunk of debt to deal with on your own. In most states, the debts you incurred with your ex are considered to be joint and are divided evenly between the two of you. It may be difficult to come up with a plan to repay your debt in a timely fashion, particularly if your ex earned more than you do. Spend some time considering the strategies available to help you deal with your debt.
Keeping up with payments
Missing payments on your debt, even if you had a good excuse because you were going through a divorce, puts a big black mark on your credit report. Therefore, in the midst of and immediately following your divorce, stay on top of making all of your payments on time. This may mean taking out payday loans to meet impending due dates when you don’t have the cash on hand because you’re still figuring out cash flow. The money you save in the future by maintaining your good credit score makes the short-term loan well worth it.
Managing debt on a single income may be difficult, especially given your need to cover housing and utility costs on your own. In many cases, you’ll need to increase your income after a divorce. As a stay-at-home parent, this may mean finding childcare so you can reenter the workforce. If you’re already employed, you might need to get a second job or volunteer to work overtime if you get paid hourly. Your increased income can help you avoid digging yourself further into debt and provide the money you need to make ends meet.
In some cases, you get a lump sum payment in a divorce that you can put toward taking a big chunk out of your debt. Paying off that marriage debt quickly has the added benefit of giving you mental freedom from your life with your ex and giving you a clean slate to start your life on your own. Even if you didn’t get money out of the divorce to help pay off your debt, you may be able to operate on a tight budget for a while so you can put a large percentage of your income toward aggressive debt repayment. Think about how happy you’ll be when you’re out of debt and use that feeling as motivation to cut back on unnecessary purchases to free up money for debt payments.
When all of the different debt payments are overwhelming, debt consolidation is a very attractive option. Instead of making payments on all of your loans to different lenders and with different interest rates, you can take out just one loan with one interest rate. Choosing a longer repayment term can help reduce your monthly payment. You can also keep the same repayment term with a lower interest rate to help you pay off your debt more quickly. Methods of consolidation include home equity loans, cash-out refinance, personal loans and credit card balance transfers.
It can take some time to get back on your feet after a divorce, particularly if you took the backseat when it came to managing household finances during your marriage. Don’t be afraid to ask financially minded friends for help looking over your budget and helping you come up with places where you can cut your expenses to make ends meet. It should only take a little practice before you adjust to managing your income and expenses on your own.
Cameron works with companies that help you deal with debt when finding ways to budget your money.