Divorce can be a real drain – just don’t let it drain you financially. We’ve narrowed down the skills every co-parent needs to regain economic stability to the five essentials.

Banking 101: What You Don’t Know Can Cost You

Some co-parents may find themselves dropped into unfamiliar territory after a divorce, needing more experience with money or financial institutions. If banking and saving are new or intimidating, the best place to start is the fundamentals.

Check out websites like Bankrate or Investopedia for help choosing a banking institution if you’ll be opening an account for the first time. Another good tip is to choose a local bank for its accessibility or a web-based one for convenience and higher interest earnings.

Understand your chosen bank’s rules and regulations because what you don’t know could be costly. Be aware of any minimum balance requirements, overdraft fees, and service charges. Establish or improve your credit history to make loans less expensive. Pay down credit card debt to improve your debt-to-income ratio. If opening a credit card for the first time (and you’ll need to in order to establish a credit rating for loans, housing, sometimes jobs, etc.), only charge the things you know you can afford to buy. And pay off the balance at the end of each month!

Budget

In its simplest form, budgeting is dividing a large amount of money into smaller portions used for different purposes. Pay for necessities like housing, groceries, and utilities first. Divide leftover money according to personal and family goals. For instance, a co-parent may decide to invest in art lessons for their child who has a natural interest in the area instead of using it for dinners out with their child when it’s their custody time.

Saving is the Name of the Game

Once familiar with banking basics, the next step is to ensure sufficient funds for life’s little (and big) surprises. Most financial experts recommend an emergency fund that can take care of all the necessities for six to twelve months. A job loss is just one of those emergencies that can last longer than anticipated. Take care of necessities first, then keep excess money in the bank to build up emergency savings.

Once emergency savings are well on their way to a six- to twelve-month amount, set aside additional money for extras. Many banks offer the ability to establish different savings plans within the initial savings or checking account, such as college, summer, holiday, or vacation funds. Money put into different “buckets” for specific spending purposes has a better chance of being spent wisely.

Measure to Manage

Finance is a numbers game. Numbers are data. To best manage your finances/data, you have to measure it. That means two things: documenting and assessing.

Write down income and expenses on a sheet of paper. If your income exceeds your expenses, you’re winning the finance game. The bigger you can make the gap between earnings and spending, the better. The faster you build your nest egg, the quicker you can prepare for pop-up expenses like car repairs or a broken water heater.

Next comes the assessment part of managing finances. Creatively find ways to either bring in more income or cut out more expenses. Making a game of thriftiness can be a fun challenge for parents and children with an inexpensive prize (or a fun visual) tied to savings.

Technology makes it easier than ever to budget and manage finances. Check out co parenting expense tracker apps that keep parental expenses in one easily accessible place.

Communicate

Any accountant can attest to the importance of communication in finance. They must clearly and punctually display documents, data, bills, payments, and ideas to co-workers and clients.

For a divorced couple, communication translates to peace and transparency in spending. As a bonus, doing so re-establishes trust. It also means facilitating business-like transactions to keep face-to-face or voice-to-voice conversations at a minimum, which is recommended by family counselors to keep heated arguments at bay.

Specific for the divorced family are co-parenting apps for Android and iPhone users that facilitate:

• Documenting
• Assessing
• Splitting child-related expenses

Think of shared parenting apps as luxury concierge services aiding one’s co-parenting life.

Strengthening the Five Essential Skills

Recognize that it’s impossible for one person to be stellar at everything. We all have our weaknesses. Thankfully, with education and practice, we can all improve in our weak areas. Additionally, it’s okay to hire a financial professional for support.

Once you recognize your weaknesses and begin to work on them, the next step is to start small. If budgeting is a pain point, start making a weekly expense budget and sticking to it. Document what money you plan to spend on groceries and gas for the next seven days and assess your predictions at the end of the week. Expand out to monthly and quarterly budgets when you get the hang of things, and then do a yearly one.

Take the Reigns

Everyone experiences a feeling of loss after divorce. Financially speaking, a two-income household reduces to one, and that’s a tough loss in and of itself. Don’t let fear, hopelessness, or inexperience with finances prevent you from taking control of your fiscal well-being. Strengthen your skills in the five essential areas or have a professional assist you.

Video