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No one likes divorce, but it’s very common in the U.S: according to the U.S. Census Bureau, 813,862 divorces or annulments were granted in 2014.  No one really has an exact figure, but the American Psychological Association estimated that 40-50 percent of first marriages end in divorce.  You might think that people with experience would do better in subsequent marriages, but this is not so: 60 percent of second marriages end in divorce, and 73 percent of couples in their third marriage do not make it.

Besides a desire to stick out commitments made, and religious values and children, often the reason couples stay together is financial, as two incomes can better pay the bills.  However, if married life is just not workable, spouses may have to bite the bullet and tough out the drop in monetary status.

Sticker Shock – When the House Is More Expensive Than You Thought

It may have been a tough fight during the divorce legal battle to keep ownership of a home during divorce proceedings, and now that the dust has settled, you may realize it’s actually a big burden. Why would someone fight to keep something they can’t afford? Oftentimes, in highly charged situations like divorce, emotions can get the better of us, and as the saying goes, you can’t see the forest for the trees.  Some emotional reasons a spouse wants to keep their house: years of effort may have been involved getting the house to look and function just so; you may feel that raising kids in a house instead of an apartment will be better for them in the long run. Another reason you may want to hang on to the house: you don’t think you can qualify for it on your own and may not be able to buy a house in the near future but if you keep the one you have now, “you’ll find a way to pay for it.”

Crippling Credit Card Debt

Often times in a marriage, couples will have joint credit card accounts and the responsibility for the cards is divided up between the spouses during the divorce.  However, even if the court says a credit card balance is your ex’s responsibility, you may still be liable.  If your ex does not pay on the joint credit cards, you may still get a late pay reflected on your credit report and your credit may suffer.  To protect your credit, you may need to make payments on balances you were not assigned in the divorce in addition to the ones which were declared your responsibility.

Mapping Out A Plan Of Attack 

You may feel like you already know you’re in trouble without having to write it all out, but in order to get a grip on your financial life, it’s still worth it to list out your total income and debt so you know what you have to work with.  It helps to divide up your income and expenses: in one column, your monthly income after taxes.  In a second column, list all of your monthly payments for your debts.  In a third column, write down your monthly living expenses: entertainment costs, gas, insurance, phone bills, groceries, and utilities.  In a fourth column, write down any monthly child support or alimony that you have to pay.

  1. Add up all the expenses in columns 2, 3 and 4. Does it exceed your monthly income in column 1?  If your total income is less than the total you calculated by adding columns 2, 3 and 4, it’s time to take a hard look at your expenses in column 3.  Can you cut expenses in this category? Some ideas are: shop around for cheaper insurance, cut cable bills, get a cheaper phone plan, and cut down on entertainment costs.
  1. If you’re already at bare bones financially, it’s time to take a look at whether or not you can afford your home. One way to tell if it might be a good idea to sell is to calculate the costs of renting.  Rent is very expensive these days and costs are only increasing.   If you can’t rent anything for any cheaper than what your mortgage costs, you might be better off staying put and building equity.
  1. Another way to dig yourself out of a hole is to take on a roommate, which would boost the numbers in column 1. What about taking on part time work?
  1. If your expenses don’t outweigh your income, yet you’re still feeling pinched, you might want to review the items in column 3 to see if you’ve forgotten something.  Do you find yourself considering dangerous options like payday loans to make ends meet? It may be time to put yourself on a budget or at the very least, start tracking where all of your money goes.
  1. Can you reduce your credit card bills? Some banks have hardship programs that will allow you to lower your interest rates and potentially waive the late fees if you ask.  Unfortunately, though, you will need to have not made payments for 60-90 days, by which time your credit will have suffered a severe blow.  Even one late payment can drop your credit score by up to 100 points.   You could also try a debt consolidation or consumer counseling service and have them try and negotiate down a lower payment plan for you.
  1. What about those alimony or child support payments in column 4? Is there any way to reduce them? Unfortunately, child support payments are calculated based on set formulas taking into account your income and your ex’s, so there’s not much wiggle room unless one of you has a dramatic change in income in the future. Revisiting this matter in court is not cheap, either, so if you’re already short of money, this may exaggerate your problems.
  1. If your credit has already suffered due to divorce financial hardships, you may need to get it healthy again by hiring a credit repair company like creditrepair.com. Poor credit does tend to cost you a lot of money in the long run.