Money Moments: How to achieve financial freedom after a divorce

April 16, 2020

A divorce is a major life change that can take a toll emotionally – and financially. Financial freedom is possible post-divorce, and here are six steps to get you headed in the right direction.


Divorce can be daunting. Even the most amicable separations result in life changes. According to the latest government statistics, about four in 10 couples wind up divorced and will need to figure out how to adapt to a new normal.

Women face a 41 percent reduction in household income after divorce. For men, the figure is 23 percent. Divorced people are not alone in facing such upheaval. A 2017 study commissioned by the National Endowment for Financial Education showed that by the time they turn 70, nearly all Americans will have experienced four or more major life events that caused their incomes to drop by more than 10 percent. The study calls these “income shocks.”

But help is out there. Personal bankers, financial planners, the government and even specialty divorce financial counselors can offer solutions. Financial freedom is possible post-divorce, as many who have achieved it can attest.

Here are some steps on the path.


Step 1: Assess your financial situation

Take a factual approach for a clear-eyed view of where you stand. What is your income? Your savings? Do you receive child support or alimony? Do you have other assets? Next, list what you owe, including mortgage, car and credit card debts. The idea is to figure out if you can live within your current means, or if you should adjust your spending to match your income.


Step 2: Reduce, downsize, sell

If you are spending more than you take in each month, consider how you can lower your bills. Many couples will sell their house as part of the divorce and split the proceeds, then rent for a time or purchase a less expensive home. The same can happen with cars, where a better model might be traded for one with lower payments. Is there anything else you can shed or sell that might help you transition to a new lifestyle?


Step 3: Seek financial help

Credit card companies may be willing to waive annual fees, lower interest rates or raise credit limits. In fact, most consumers who make these requests are successful, but many never ask.

Another strategy for reducing monthly payments is to consolidate loans into one manageable payment. The government provides information on credit and debt through the Consumer Finance Protection Bureau, advising anyone seeking credit counseling to be sure the service is accredited with either the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA).

While much of this advice is similar for anyone seeking to gain control of a tough financial picture, it’s important for divorced people to make sure they fully separate their finances and build their own, individual lines of credit. This way an ex-spouse won’t be held responsible for their former partner’s actions.


Step 4: Take your time

Should you happen to get a big payout, don’t rush into a major purchase or big decision. Weigh your options carefully, perhaps using the advice of your personal banker. The general rule is to not compound problems by hasty decision-making. An appointment with a personal banker can help you see your financial situation more clearly now and over the next few years.


Step 5: Don’t forget retirement planning and long-term savings

While you may be in an acute financial position as you transition to a smaller income, it’s important to save what you can for long-term goals. A government study found divorced women particularly end up poorer in their retirement years due to the greater setbacks they experience compared to divorced men and married people, and many have reduced social security benefits. If your workplace offers a 401(k) savings plan, remember that some is better than none to prepare you better for the future.


Step 6: Take the long view

Though divorce can be emotionally and financially challenging, keep in mind practicing good money management, budgeting and using available resources can help you achieve financial freedom.


To learn more about the steps you may need to take after a divorce, make an appointment with a personal banker.

Related content

Retirement advice: How to retire happy

10 ways to increase your home’s curb appeal

6 tips for trust fund distribution to beneficiaries

4 reasons why estate planning is important

How to talk about money with your family

Estate planning documents: Living trusts vs. will vs. living will

Reviewing your beneficiaries: A 5-step guide

How to protect your digital assets in your estate plan

Financial steps to take after the death of a spouse

LGBTQ+ retirement planning: What you need to know

Retirement income planning: 4 steps to take

Is a Health Savings Account missing from your retirement plan?

Multiple accounts can make it easier to follow a monthly budget

Your 4-step guide to financial planning

How grandparents can contribute to college funds instead of buying gifts

A beginner's guide to investing

4 ways to free up your budget (and your life) with a smaller home

LGBTQ+ financial planning tips

Do your investments match your financial goals?

The secret to successful service provider integration

Insource or outsource? 10 considerations

Retirement savings by age

5 things to avoid that can devalue your home

Key milestone ages as you near and start retirement

Should I itemize my taxes?

Preparing for retirement: 8 steps to take

Unexpected cost savings may be hiding in your payment strategy

Lost job finance tips: What to do when you lose your job

6 pandemic money habits to keep for the long term

Finance or operating lease? Deciphering the legalese of equipment finance

How I did it: Bought a home without a 20 percent down payment

Checklist: 10 questions to ask your home inspector

Closing on a house checklist for buyers

How to track expenses

How to build wealth at any age

Investment strategies by age

5 financial goals for the new year

How to get started creating your business plan

Handling the finances of someone who has died: Terms and definitions

When your spouse has passed away: A three-month financial checklist

What documents do you need after a loved one dies?

Checklist: financial recovery after a natural disaster

Simple steps to be ready for a natural disaster

Rebuilding finances after a natural disaster

How to plan and save for adoption and in vitro fertility treatment costs

Preparing for adoption and IVF

11 essential things to do before baby comes

How to manage money tips

For today's homebuyers, time and money are everything

Uncover the cost: International trip

Uncover the cost: Wedding

What is Medicare? Understanding your coverage options

Using 529 plans for K-12 tuition

Retirement plan options for the self-employed

How to open and invest in a 529 plan

How to manage your finances when you're self-employed

Safeguarding the payment experience through contactless

COVID-19 safety recommendations: Are you ready to reopen?

Buying or leasing? Questions to ask before signing a contract

The costs of hiring a new employee

5 steps to take before transitioning your business

Make your business legit

How to establish your business credit score

Talent acquisition 101: Building a small business dream team

10 tips on how to run a successful family business

How to sell your business without emotions getting in the way

How to save money while helping the environment

Planning self-care moments that matter (and how to finance them)

How to expand your business: Does a new location make sense?

7 steps to prepare for the high cost of child care

How to save for a wedding

How I did it: Turned my side hustle into a full-time job

How to test new business ideas

How can I help my student manage money?

7 steps to keep your personal and business finances separate

3 types of insurance you shouldn’t ignore

8 steps to choosing a health insurance plan

7 things to know about long-term care insurance

5 unexpected retirement expenses

Year-end financial checklist

How I did it: Transitioned from the military to a private sector career

4 steps to finding a charity to support

How to winterize your vehicle

Don’t underestimate the importance of balancing your checking account

What you need to know as the executor of an estate

How to build a content team

Can fantasy football make you a better investor?

Year end tax planning tips

10 questions to ask when hiring a contractor

Beyond the mortgage: Other costs for homeowners

Home buying myths: Realities of owning a home

House Hacks: How buying an investment property worked as my first home

Should you buy a house that’s still under construction?

Your guide to breaking the rental cycle

Travel for less: Smart (not cheap) ways to spend less on your next trip

Tips for working in the gig economy

Which is better: Combining bank accounts before marriage — or after?

Tips to overcome three common savings hurdles

Money Moments: 8 dos and don’ts for saving money in your 30s

Money Moments: 3 smart financial strategies when caring for aging parents

Is it time to get a shared bank account with your partner?

Friction: How it can help achieve money goals

It's possible: 7 tips for breaking the spending cycle

What to consider before taking out a student loan

Here’s how to create a budget for yourself

3 awkward situations Zelle can help avoid

9 simple ways to save

Do you and your fiancé have compatible financial goals?

What military service taught me about money management

From LLC to S-corp: Choosing a small business entity

How I did it: Paid off student loans

Costs to consider when starting a business

Questions to ask before buying a car

Adulting 101: How to make a budget plan

How I did it: Learned to budget as a single mom

Multigenerational household financial planning strategies

Working after retirement: Factors to consider

Personal loans first-timer's guide: 7 questions to ask

Dear Money Mentor: How do I set and track financial goals?

Understanding guardianship and power of attorney in banking

Real world advice: How parents are teaching their kids about money

What financial advice would you give your younger self?

How to stop living paycheck to paycheck post-pay increase

What you need to know about renting

What’s in your emergency fund?

Car shopping: Buying versus leasing your next vehicle

What you should know about buying a car

Take the stress out of buying your teen a car

Tips for navigating a medical hardship when you’re unable to work

Money management guide to financial independence

Money Moments: How to manage your finances after a divorce

Personal finance for teens can empower your child

5 reasons why couples may have separate bank accounts

U.S. Bank asks: Transitioning out of college life? What’s next?

How to use debt to build wealth

30-day adulting challenge: Financial wellness tasks to complete in a month

Money Moments: Tips for selling your home

How I did it: My house remodel

Resources for managing financial matters after an unexpected death

Webinar: Uncover the cost: College diploma

Crypto + Homebuying: Impacts on the real estate market

Military homeownership: Your guide to resources, financing and more

U.S. Bank asks: Do you know your finances?

Webinar: Bank Notes: College cost comparison

Do I need a financial advisor?

Good debt vs. bad debt: Know the difference

Parent checklist: Preparing for college

Annual insurance review checklist

7 financial questions to consider when changing jobs

Unexpected cost savings may be hiding in your payment strategy

Start of disclosure content

Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rates and program terms are subject to change without notice. Mortgage, home equity and credit products are offered by U.S. Bank National Association. Deposit products are offered by U.S. Bank National Association. Member FDIC.