Reducing Debt After Divorce
Getting through a divorce can be a very stressful process. Aside from the emotional pain, there is also the financial
challenge. Most couples who filed for divorce were confronted with a lot of expenses and sometimes resorting to debt is necessary. Some even had to cash out on their retirement and 401k funds to get the financing assistance they need.
Financial experts warn against borrowing from your retirement or 401k fund since it can put you in a worse situation. For instance, withdrawing from your retirement would mean paying the additional penalty and taxes. On the other hand, using 401k fund means losing the potential interest that your money is supposed to be earning.
In this article, let’s discuss the practical ways on how you can cut back your costs and reduce your debts during and after your divorce process.
Pay attention to your spending. This isn’t the time to be careless about your spending. You’ll need all the help you can get to save money and prepare for your future. Budgeting your monthly income is a must. List down all your expenses and prioritize them according to your needs. Thus, you can sure that your income will be allocated accordingly and that every cent of your money would be spent wisely.
Change your lifestyle. You may need to give up some of your luxuries or whims to slash off your bills. For instance, you may subscribe to a lower cable plan, cellular plan, a lower DSL package or give up your magazine subscriptions. You may want to move to a smaller apartment to save your rent. You may need to get a part time job to earn additional income. These measures call for a lot of self-control, patience, and motivation. However, your sacrifices and hard work would certainly save you from unnecessary debt problems in the long run.
Control your credit card use. If you own credit cards, be particularly cautious on how you use them. Always submit your payments on time to avoid penalty fees. Pay off your monthly charges in full to avoid the additional cost of interest. Don’t use your credit card for items that you can pay in cash.
Talk to your creditors. This is also the time to meet with your creditors. If you have a mortgage loan, a car loan, or credit card debts, this is a very important step to take. Explain about your current situation and negotiate for easier repayment terms. Many lenders are willing to extend consideration to their clients especially during financial crisis.
Don’t open new credit. Again, this isn’t the time to open new accounts. If you have existing debts, don’t use another debt to repay them. This could only lead you to worse debt problems. Instead, work out a repayment plan and stick with it.
Seek credit counseling. If you think that your finances are getting out of control, don’t hesitate to seek help. Find a government accredited credit counseling agency. A reliable counselor should be able to advise you specific steps to help you get over your debt problems.
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