Post-Divorce Financial Considerations


If you’re in the middle of a divorce, you know the emotional toll it can take. And as with any significant life change, the financial impacts can be substantial as well. As you assess your situation and determine how you may need to adjust your lifestyle, here are a few steps that can help:

Establish a budget

  • Document all of your income and expenses, from salary to dividends and interest, to alimony/child support if you’ll be receiving it (or having to pay it)
  • Divide your expenses into two categories: necessities/fixed (housing, groceries, and transportation costs), and discretionary spending (vacations, dining out, other entertainment)

There’s a good chance you’ll need to cut back on the discretionary spending now that your life has changed. But do try to budget for some entertainment or fitness classes from time to time, in the interest of self-care — which is also important during this time.

Reevaluate your financial goals

Now that you’re on your own, your goals have likely changed. Think about what you’d like to achieve:

  • Is your cash reserve adequate, or do you need to save toward that before anything else?
  • Do you need to save and invest more for retirement?
  • Do you want to pursue more education/training?
  • How much credit card debt do you have, and how can you pay it off?

It’s a good idea to minimize the use of credit cards at this time. But if you already have some debt that you need to pay down, these tips may help:

  • Pay off the highest-interest debt first.
  • Pay quickly, or schedule recurring payments to avoid late fees and interest-rate hikes.
  • Consider a consolidation or refinancing option.
  • Talk to a Horizon Bank financial advisor about ways to protect or re-build your credit history if necessary.

Review your insurance needs

Insurance coverage is often negotiated in the divorce settlement, but you may have additional needs. A financial advisor can help you assess needs such as:

  • Temporary COBRA coverage
  • Coverage through your employer or on your own
  • Disability and life insurance policies — including updating beneficiaries and personal representatives so that your ex is not placed in these official roles should something happen to you
  • Property insurance to reflect updated ownership

Tax considerations

Your future tax filings will change with a divorce as well. You’ll need to modify things like:

  • Sources of income. Remember that alimony is considered taxable income, but child support is not.
  • Filing status. This will change for the full year in which you were divorced.
  • Deductions. Depending on whether or not you’re the custodial parent, you may qualify for certain dependency exemptions, the child tax credit, and credits for child/dependent care — as well as student loan interest and tuition deductions.


There are many details involved in the financial side of divorce, and putting all the pieces together can be time-consuming and stressful. If you could use some Sensible Advice, reach out to Horizon Bank any time.