6 Ways to Earn Money and Get Rid of Debt in Divorce
Going through a divorce can feel incredibly draining: emotionally, psychologically, and—of course—financially. While emotional healing can be a long, winding road… To help, we are sharing the top 6 ways to be debt-free after divorce. Reducing Your Debt As per the Centers for Disease Control Prevention (CDC), the divorce rate is around 2.7 per 1,000 people in 45 reporting states, including the DC. The majority of the couples going through a divorce can find it challenging to deal with the debt situation. Nevertheless, you can use these methods to reduce your debt and soon eliminate it.
1. Consolidate your Debt
Consolidating your debts into one lower monthly payment can help simplify and lower your payments. You can take out a debt consolidation loan or use a 0% balance transfer credit card to roll multiple debts into one. This can help you pay off debt faster by lowering interest rates. Just be sure to shop around for the best rates and watch out for fees [1].
-2. Negotiate with Creditors
Contact your creditors directly and negotiate reduced or alternate payment plans. Many may be willing to lower interest rates or waive fees to help you get back on track. Be honest about your situation and ability to pay. Get any agreements in writing [1].
3. Divide your Loan
If you have joint debts with your former spouse, work to divide and refinance them separately. This removes you from liability for debts solely in their name. You may be able to buy out their share of a joint asset by taking over the associated loan [2].
4. Increase your Sources of Income
In a nutshell, your strategy needs to be about increasing your income. And the good news is that divorce is often a catalyst for getting creative and practical with your life. It can inspire your ambition to find more challenging things to do and to be compensated for it. Related: Divorce Recovery: 10 Things to Do If You are Suddenly in a Single-Parent Home. Here are some ideas for increasing your income:
- Ask for a raise at your current job
- Find a higher paying job
- Take on a side gig like Uber driving
- Rent out a room in your home
- Sell unwanted items online
Every extra dollar you can earn goes towards paying off debt and securing your finances [1].
-5. Look for Ways to Get More Cash
Beyond earning more, look for ways to get instant cash infusions that can be used to pay down debt:
- Tax refunds
- 401k loans
- Life insurance cash value
- Home equity line of credit
- Credit card balance transfers
Just be cautious when tapping retirement accounts or home equity, as there are risks involved. But used strategically, they can give your finances a needed boost [1].
6. Cash in Investments
If you have non-retirement investments like stocks, bonds or mutual funds, consider cashing them in to eliminate debt. This especially makes sense if they are not performing well. Paying off high interest credit cards or loans can essentially give you a better return than keeping underperforming investments.
Just be aware of the tax implications for selling any investments. But often it still makes sense to pay off debt. And you can always replenish your investments later once your finances have stabilized [3].
Other Tips for Managing Finances After Divorce
Here are some other important money moves to make during and after divorce:
-- List out all forms of your income and then list out your payments, including minimum debt payments. Take a hard look at your expenses, your lifestyle, and make budget cuts where you can [3].
- Open your own individual bank accounts and credit cards. Close joint accounts and remove your name from accounts solely in your ex’s name [4].
- Inventory all marital property and debts. Document everything as you go through the divorce process. [2]
- Change beneficiaries on retirement accounts, insurance policies, etc. to protect your interests [5].
- Consult a financial advisor. They can help you make smart money moves and avoid costly mistakes [6].
Going through a divorce is never easy, but taking proactive steps with your finances can help position you for future stability and success. The more informed and prepared you are, the better off you will be. With some strategic planning, you can reduce debt, increase income, and take control of your money after divorce.
References
[1] https://sasforwomen.com/6-ways-to-be-debt-free-after-divorce/
[2] https://www.aarp.org/money/investing/info-05-2012/protect-money-in-divorce.html
[3] https://marriagekidsandmoney.com/podcast/money-after-divorce/
[4] https://www.cnbc.com/2018/05/10/how-to-get-a-divorce-without-going-broke.html
[5] https://texaslegal.org/texaslegal-blog/6-steps-help-manage-finances-during-divorce
[6] https://money.usnews.com/money/personal-finance/family-finance/slideshows/steps-to-protect-your-money-in-divorce