Erika Taylor says that next time around, she’ll make sure that she and her partner are on the same page with finances. “You can find out a lot about a person by asking where they plan to be financially in the next five years or what their credit score is,â€ says the newly divorced Taylor, mother of a 3—year-old son, Braylon, residing in Farmington Hills, a Detroit suburb.
In April of 2006 Taylor and her husband purchased a $235,000 home. Taylor was the primary signor on the mortgage and moved in just months before their first child was born. They were finally living what she thought was the American dream, but in less than a year, they began having financial difficulty.
In February of 2007, Taylor’s husband was laid off and four months later, so was she. The lack of income put a strain on their finances. The couple separated later that year. Eventually, the foreclosure notices started coming. Neither had enough of a cushion to save their home and in 2009 they lost it to foreclosure just three years after they were married.
Despite a bumpy beginning, Taylor is determined to once again become a homeowner. She is steadily working to improve her credit score by making payments on time and in full. In addition, she has found ways to generate additional income. “I felt like I had lost everything, but going through the whole process made me realize the importance of having multiple streams of income aside from working your daily job,â€ she says. Now, Taylor works for an online university as an enrollment counselor making $65,000 a year, including bonuses. She rakes in an additional $500 to $2,000 per month by offering career and business development solutions and workshops through her business, Taylor Made Branding (www.taylormadebranding.com).
Here are some tips that can help you get back on track:
Rebuild credit. If your home was recently foreclosed but you wish to be a homeowner in the future, know that it could take anywhere from two to six years before a lender will offer a reasonable interest rate. In the meantime, it will be important for you to rebuild your credit. You can do this by paying all of your bills in full and on time. Also make an effort to pay down outstanding debt. In addition, a credit counselor can help you devise a financial management plan.
Educate yourself. Many divorced women find themselves in control of the household finances for the first time after their marriage ends. If this describes you, make a point to attend financial literacy workshops and read as many educational materials as you can.
Manage accounts. Don’t forget to remove your former spouse as the beneficiary on your life insurance forms and on your bank and retirement accounts. Also remove your name from joint bank and credit card accounts.
Rebuild savings. Divorce can be hard on the wallet. Make savings a priority. In time, Taylor plans to rebuild her savings, which was eaten by attorney’s fees. She estimates that by moving back in with her parents, she is saving more than $1,000 per month. She contributes $100 per month to her emergency fund, $50 biweekly to her son’s college fund, allocates 10% of her paycheck to her 401(k), and saves all the income from her side business. “Save more, spend less, and invest wisely,â€ advises Linda Leitz, CFP. Create a livable budget and realistic lifestyle. In addition, having dependents makes it vital for you to be properly insured. Make sure that you have adequate disability and life insurance.
Assemble a power team: “Divorce is emotional and a lot of women just want to get it over with,â€ says Barbara Stanny, author of Secrets of Six-Figure Women (Harper Business; $23.95). A good team will include a financial planner, attorney, and accountant, and they should give you sound advice and hold you accountable.
–LaToya M. Smith
FINANCIAL RECOVERY RESOURCES
How to Be the Family CFO (Greenleaf Book Group; $19.95), by Kim Snider, provides guidance on managing household finances by applying the basic rules of managing a successful business.
We Need to Talk: Money & Kids After Divorce (Bright Leitz Publishing; $13.95), by Linda Leitz, offers advice on financial recovery after divorce.