There are very few things in life that are more devastating in a person’s life than a divorce. No matter if you’re the husband, wife, child, or family members watching it all unfold, divorce can shatter relationships, lead to isolation and depression, and cast a dark shadow on your future. One of the most trying aspects of going through a divorce is dealing with the cost, both financial and emotional. There’s no such thing as a cheap divorce, and recovering from one is an uphill struggle no matter who you are.
In an article from 2006, Forbes averaged that a contested divorce costs anywhere between $15,000 to $30,000 dollars, mostly because of legal fees. There are no easy solutions to recovering from a divorce, and there’s no magic formula to instantly improve your situation, but these following methods will help you to get rid of some of your debt and steer your life back in the direction you want to go.
Sell Items You Don’t Need Anymore
Divorce almost always ends with the division of property the couple shared during their marriage. While you might be tempted to hang on to everything that you were granted, especially since you may have feared losing it during your divorce proceedings, the reality is that your priority now is getting out of debt. Clinging tightly to your prized collection of Elvis memorabilia isn’t going to help you do that.
Consider hosting a yard sale, or take your items to a flea market or pawn shop to sell. If you don’t have the time to go to different locations, or you’re afraid of being cheated out of money by a shady broker, there are numerous web services, like eBay, that you can use to sell your items. However, you need to be wary of expensive usage fees and shipping costs if you decide to sell online.
Also remember that the items you’re thinking about selling don’t have to be in like-new condition; even gently used possessions can still turn a healthy profit for you. An article by Money Crashers indicated that books, sports equipment, picture frames, video games, name-brand clothes, glassware, and old records and record players are the top items that can fetch prices just below, or even above, their brand new value if they’re not severely used. Since most of these items are common to every household, and since you may not need any, or as many, of them now that you’re on your own, consider letting them go in order to get the money you’ll need to pay off your debts.
Refinance Your Mortgage
One option that may be viable for you, if you and your ex are homeowners, and are negotiating your divorce on good terms, is to refinance some of your debts. One smart choice, if you decide you want to keep your house, is to refinance your mortgage by taking your spouse’s name off of the loan, and relieving them of financial responsibility. Black Knight Financial Services estimated that American homeowners missed more than $13 billion in savings in 2015 because they didn’t refinance their mortgage. Refinancing could allow you to keep your house, while reducing the amount you’re paying per month on your mortgage.
This can be tricky, and isn’t applicable in every scenario. Once you’ve refinanced and your spouse’s name is removed from the loan, you will be solely responsible for paying the mortgage at the new rate and loan cycle that you have negotiated. In order for a lender to even consider granting you the option to refinance, you’re going to have to have the agreement of your spouse and the lender, your outstanding principal must be less than the value of the home, and you must have a good credit score.
Even if all of these factors line up for you, and a lender is willing to work with you to refinance your home, exercise caution before you commit to refinancing. The New York Times reported that the average cost associated with refinancing ranges anywhere from 3 to 6% of your outstanding principal. If you still owe $200,000 on your house, you can expect to add an additional $6,000 in refinancing fees.
Though it may sound obvious, one thing you absolutely must do if you’re drowning in debt from your divorce is to carefully analyze your bills and expenses, and see where you can cut back. While your car payment isn’t going anywhere, and you definitely have to meet your alimony or child support payments, there are other areas that you can look at cutting back on.
If you’ve decided to either sell your house, or transfer full ownership to your ex-spouse, you should consider renting either an apartment or house, instead of trying to buy again. And, while this can be discouraging to many divorcees, since they’ve been used to having a space that belongs to them alone, you should consider finding a rental property with other tenants, or invite others to rent with you. This will help reduce the overall amount of rent you’re responsible for, as well as having access to a roommate who can assist with grocery and utility expenses.
In that same train of thought, make a conscious effort to reduce the amount that you’re spending on food and utilities. Americans waste an average of $50 per month on electricity for appliances they leave on, but aren’t using. Now that you’re on your own, you won’t have to buy as much food, and have more control over how many lights are on in the house or what the A/C is set at. Ensure that you’re turning off any lights you aren’t using, check that your water faucets aren’t leaking, and try to keep your A/C or Heater at a comfortable, but middle-range, temperature.
Take Out a Loan to Consolidate Your Debts
If you’ve just gotten divorced, and finished reviewing that high bill from your divorce attorney, the last thing you’re probably considering is obligating yourself to pay out more money. The reality is that taking a personal loan may offer you a chance to consolidate your various debts into one account, and save money doing it.
By consolidating your debts with a single lender, you only have to manage a single monthly payment. If you’re still trying to pay off the individual credit cards that you used during your marriage, especially if you needed them to pay for your attorney fees, you’re probably keeping track of numerous different payments you’re obligated for, with much higher interest rates than a loan can potentially offer.
Your credit score will most likely take a hit just after your divorce is finalized, and there isn’t a lot that you can do to prevent it. Fortunately, there are plenty of loan options for bad credit scores that still offer good interest rates and payment plans. A personal loan that you can manage well over time will help you strengthen your credit history, diversify your credit, and get your credit score back in a good range.
A final benefit of pursuing a loan to consolidate your divorce and credit card debts is that you will reduce the amount of your available credit that you’ve used, which will also help get your credit score back up where you need it to be when you’re ready to buy a house again.
Keep Moving Forward
As I said at the beginning, there’s no easy way to deal with a divorce. You’re going to hurt and you’re going to question every decision you ever made in your former marriage. Despite the pain that you’ll have to endure, don’t be discouraged, and don’t quit, no matter how bad things may seem.
Focus on the methods we’ve discussed, and though it will take time, things will get better. It will improve your financial situation, give you an outlet to focus your efforts, and give you a sense of control over your life that lead to a feeling of strength and resolve you need to face the future with an optimistic outlook.