If you're newly single, you may be hitting reset on your finances now that you're on your own. After all, in the past, there may have been two of you to help pay for essentials like your mortgage, utilities, groceries and insurance — not to mention dinners out and coffee runs. If you're feeling a bit overwhelmed, focus on the basics, like establishing new financial goals and a budget. Get started on this new chapter with these four tips.
Did you know? The average cost of a contested divorce in Canada is more than $12,000.
1. Set goals that are important to you.
You may have had to compromise on your financial goals in the past, but now things have changed. It's time to focus on you and what's best for your future and that of your family. Take some time to think about whether the goals you shared with your former partner still apply. It might be worth talking to a financial planner who can help guide you on where you want to be in the future, and how to get there.
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2. Budget for flying solo.
Look at your monthly budget with fresh eyes:
- Step 1 : Determine how much it costs to pay for the stuff you really need, like housing, food and so on.
- Step 2 : Set aside a percentage for savings and investments, keeping in mind any major goals you may have, such as in regards to your retirement. It's a good idea to build an emergency fund that can cover up to half a year of expenses.
- Step 3 : See what's left over for other things, like entertainment and travel.
If you find you can still support your current lifestyle, great. Otherwise, look for ways to tweak your budget. Even small changes can make a big difference.
3. Do your research.
Even if you're divorcing amicably, you may need to brush up on the steps required to legally end your marriage. Some former couples are able to reach agreements without using lawyers, saving lots of money in the process. If this sounds like a possibility, you may even be able to write your own divorce settlement agreement. However, if your relationship isn't quite friendly at the moment, you'll likely want to get expert legal advice to help protect your interests.
4. Make sure you're well covered.
Now that you're single, check in on your life insurance situation. Are you covered in case something happens to you? If you need to stop working due to illness or an accident, you can no longer rely on a dual income as you may have in the past. That's where critical illness and disability insurance can help. Meanwhile, if you have kids, a life insurance policy can help make sure they're properly cared for if you were to pass away.
How much life insurance you need may have changed, especially if your total debt, savings and investments are different now that you're single. You can find out how much you need with our life insurance calculator.
Finally, don't forget to update your beneficiaries! Your former partner may be listed as your life insurance beneficiary, as well as the beneficiary of your retirement savings plans. If you fail to make a change, he or she could end up with your assets.
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These comments are general in nature and should not be construed to be legal or tax advice, as each client’s situation is different.
Please consult your own legal and tax advisor.
*BMO Life Assurance Company