No one enters a marriage expecting it to end in divorce. But when it happens, it brings plenty of emotional and financial challenges.
While professional legal advice is essential, it’s just as important to remember that you don’t have to wait until the divorce is final to start planning your finances. In fact, the sooner you start, the better prepared you’ll be for the next chapter.
Even while the settlement is still in progress, there are steps you can take to understand your financial position and begin rebuilding for the future.
Understand Where You Stand Financially
The first step is to get a clear picture of your money situation. Start by making a simple list of everything, including:
Your income — like your salary, maintenance payments, child support, or any other money coming in.
Your expenses — things like rent or mortgage, bills, childcare, transport, groceries, and everyday spending.
Your debts — such as mortgages, loans, or credit cards.
Your savings and investments — whatever you have saved or invested, big or small.
It’s easy to overlook those smaller, regular expenses — the ones that quietly chip away at your bank balance. And when you’re managing everything on your own, they tend to feel even heavier, especially if you were used to splitting the costs with your partner. What once felt manageable can suddenly add up fast, from everyday essentials to the little extras you didn’t think twice about before.
Plan for Divorce & Tax Implications
Changes to your tax situation or other long-term financial commitments can impact your overall plan. That’s why it’s worth taking the time to do financial planning now. It can help you spot any potential issues early, avoid surprises, and keep your finances steady as you move forward.
Once you’re divorced, you’ll no longer be taxed as a couple — you’ll be taxed as a single person, which may change your tax rate or credits. It’s worth speaking to your financial advisor to understand what this means for you. For example, if you receive assets as part of your settlement and later decide to sell them, you might face capital gains tax, depending on the circumstances.
When it comes to maintenance payments and tax, the rules can feel a bit confusing, but it’s good to know the basics. If you’re paying or receiving legally enforceable maintenance under a court order, and it’s for the benefit of a child, it’s ignored for tax purposes.
However, if the payments are for your ex-spouse, they count as taxable income for them — and the person making the payments can claim a tax deduction, including for USC.
On the other hand, voluntary maintenance payments (that aren’t legally enforceable) aren’t considered for tax. The paying spouse can’t claim a deduction, and the receiving spouse doesn’t pay tax.
It’s important to let Revenue know about your change in circumstances so your tax position is updated correctly.
And don’t forget: if you’re separated or divorced and you’re caring for a child, you might be entitled to the Single Person Child Carer Credit, which could give your finances a helpful boost.
Set Up a Budget That Works for You
Your situation has changed, so your budget needs to change, too. Start with your rent or mortgage, food, utilities, and childcare, then look at the extras. This is a good time to cut out anything you no longer need, like unused subscriptions or memberships.
It’s not just monthly bills. Things like car servicing, school uniforms, or annual insurance renewals can sneak up on you. Plan for them so they don’t catch you by surprise.
The proper budget doesn’t have to be perfect — just realistic enough to give you control and peace of mind. Take a look at our free personal budget planner to get started.
Publisher: Source link
