Not only is the process of hiring an attorney and getting divorced an expensive proposition, but once your divorce is over, you’ll have a massive hit on your pocketbook. That hit can leave you in the unfortunate position of struggling to make ends meet. You now have to do a lot more on your own, with a lot less income to spend. Many people try and live the same lifestyle without implementing simple and logical ways to save money. That makes no sense. Here’s a list of the easiest and most impactful ways you can save money after your divorce:
Create a Budget
The first step in identifying where you can save money is knowing how you are spending it, and creating a budget for yourself. Even if you don’t stick to it, just knowing where your money is going will help you identify areas where you can save.
Refinance Your Home
Housing is one of the costliest expenses for any individual or family. If you pay a mortgage, you should look into refinancing. Consider this: A 30 year $250,000 loan with an interest rate of 4.75% requires monthly principal and interest payments of $1,304.12 ($15,649.44 in annual payments). That same $250,000 loan with a reduced interest rate of 3.75% would lower your monthly payments by $146.33 down to $1,157.79. That represents an annual savings of $1,755.96.
Interest rates are still low. Contact your lender to see what the current interest rates are, and if refinancing makes sense for you.
Grieve Your Property Taxes
Since real estate prices have recently fluctuated in a big way, many homes are assessed at higher than their actual values. If your home falls into this category, you are paying more taxes than you should! Each State in the US has a process to grieve property taxes and you can either do it yourself or hire an attorney to do it for you. Many attorneys will only charge you if they can reduce your taxes so there’s no risk in trying.
You have the potential to save hundreds or even thousands of dollars by grieving your taxes, so why wait?
Consider Tax Implications of Your Divorce
Once divorced, you will file your income taxes as a single person, and perhaps as head-of-household. Talk to your accountant about recalculating the amount of payroll taxes you should have withheld. You may increase your take-home pay just by lowering your withholding. Also, if you are paying alimony and cutting a check to your ex-spouse every month feels brutal, take comfort because these payments can be tax deductible. Also, your ex-spouse must report what you give him/her as taxable income.
Slash Your Insurance Premiums
It’s easy to see if you can reduce your insurance premiums. First, check your deductible amounts specified in your policy for your home and cars. If you’ve had no claims and your deductibles are high, you can save by lowering them. Taking a defensive driving class can save you money on your car insurance rates, and it may help make you a safer driver to boot.
Depending on your age, you can expect to save between 5-15 percent for a defensive-driving class discount. These classes can also reduce points you may have on your license. Call your agent to determine all of the ways you can reduce your rates.
While you are at it, make sure all available discounts are applied to your policy. You will be surprised at how many are available that you don’t already know about.
Shop around as the competition is intense. There’s a great chance that switching insurance companies for both your home and/or automobile policies can save you hundreds of dollars or more. After going through this exercise with my wife Karen, we reduced our annual automobile premium by over $2000!
Complete a Credit Checkup
Strong credit helps you get what you want, and often for less money. It can help you get a car loan or a mortgage at reduced interest rates. It can also save you money on insurance premiums and helps you qualify for credit cards offering cash back or free travel. A credit checkup will identify if you are on your ex-spouse’s credit cards while identifying weak spots you may need to fix.
You should check both your credit reports and credit score. Your credit reports show how long you’ve had credit accounts, your balances and if you had late payments. The reports will also show negative information, such as accounts sent to collections or bankruptcy filings.
The government-mandated AnnualCreditReport.com website is the quickest way to request reports, but you can do it by phone or mail too. You can also get a free credit score, and sometimes free credit report information, from personal finance websites and some financial institutions.
Pay Off Your Credit Cards and Avoid Common Mistakes
The average consumer credit card rate is 16.75% as of January 13, 2017 according to the latest credit card tracking bureau. With the US Bank Prime Rate at 3.25%, credit card companies are charging 13.5% over Prime. Credit card companies are making big bucks off you! High interest rates should discourage you from using your credit card and at least, never carry a balance. We know this is not the case as credit card companies earn billions a year from consumer’s lack of spending discipline.
Since you will most likely need your card, you should call your credit card company and ask for a lower interest rate. Many times, to keep you as a customer, they will offer you a promotion and lower your rate for 6-12 months. If you have available funds sitting in a low interest-bearing savings account, take that money and pay off your credit card balance. This will save you money on the cost of those high monthly interest payments. Here are 8 common credit card mistakes you might be making.
Leverage Your Employee Benefits
The Unreimbursed Medical Flexible Spending Account (Medical FSA) allows you to set aside money to pay for qualified medical and dental expenses not paid by any group benefits plan under which you or your dependents are covered. The Dependent Care Flexible Spending Account (Dependent FSA) allows you to set aside funds to pay for anticipated expenses related to dependent care required to permit you to work. Reenrollment is required each calendar year for each of these.
Because these benefits are free from federal and state income taxes, your taxable income is reduced, which increases the percentage of your take-home pay. Check with your employer to see if these benefits are available for you.
Capitalize on Your Employer’s 401(k) Match
Though not every company sponsors a 401(k) plan, of those that do, about 92% match workers’ contributions. If your company offers a 401(k) match, contributing enough of your own money might get you an additional $300 a month courtesy of your employer. Assume your company will match up to 3% of your salary, and you’re a higher earner bringing home $120,000 a year. If you contribute $3,600 of your own money, you’ll get another $3,600 from your company. This is a no-brainer.
Shop Only for Necessities
Cut back on the temptation of impulse buying by determining and differentiating what you “need” from what you “want”. By doing so, you will limit shopping and spend money only on those items you need. When you have to shop, take advantage of the stores mentioned below that provide the highest discounts and values.
Shop for Clothes in Discount Outlet Stores
If you shop at Saks Fifth Avenue, or Nordstrom or Bloomingdales, STOP! Each of these stores also have outlets that offer the same name brands and advertise savings of up to 70% or more. I have shopped at both the original and outlet stores and save substantial dollars at the outlets. Try them and you will save there too.
Shop at Big Box and Warehouse Clubs
Membership warehouse clubs like Costco, Sam’s Club and BJ’s Wholesale Club, or big box stores like Walmart and Target, have the potential of saving you big money while giving you the best value. Sometimes, with the cost of membership (Costco: $55 for Gold and $110 for executive membership; and Sam’s: $45 for Sam’s Savings, Business and Military and $100 for Sam’s Plus membership) and buying more items than you need, you don’t save. Therefore, you need to have discipline and do your homework.
Unlike membership stores, big box stores are a great choice for everyone. If there’s one of these stores within a reasonable distance, it’s worth it to shop there and see for yourself.
I favor Costco since the savings I get on everyday items ranging from food to clothing and household furnishings, far outweighs the cost of the membership fee. They have an amazing return policy that guarantees your purchases with no specified time limits which keeps me going back.
Cut Back on Household Help
Forget about perfect. Set a routine for getting necessary housework done. If you are paying someone to come every week, consider cutting back to every other week or even once a month and have your kids pitch in more with the chores. Do what you can, and don’t sweat the rest. Also, instead of hiring a baby sitter each time you go out, consider swapping babysitting time with a friend. That way each of you can take some time away from your kids without having to pay a sitter.
Merge Your Bank Accounts
Since banks charge fees to keep minimum balances, you can avoid those fees by combining accounts and closing the ones no longer needed.
Eat Out Less Often
Restaurant food is expensive and can be a big slice of your monthly bills. If you buy simple, healthy ingredients you can make delicious and nutritious food for a fraction of what you would pay if you were eating out. Consider entertaining friends at home and have each person bring a dish and rotate locations each time. That way, you will save money, enjoy home cooked foods, and have a better social experience instead of being rushed through dinner at crowded restaurants.
Having a few drinks or a bottle of wine with dinner can increase your bill quite a bit. Save money by cutting back on your alcohol consumption. If you must drink, do it at home.
Cut Your Cable and Phone Bills
For these expenses, the first step is to examine your plans to see what services are needed and what you are using. Do you need unlimited minutes or a data plan you are not using? If your cell phone is always with you, do you need a land line too or should you eliminate it? Do you use all of the premium cable channels such as HBO and Showtime?
Getting a more modest plan can save you a lot. If you are not ready for a more modest plan, you can compare available plans online and call your company armed to ask for a better rate.
I call once a year and ask for the “cancellation department”. My call is routed to a team whose job is to keep me as a customer. I let them know I am considering cancelling their service and are looking for a lower rate from a competitor. Most times, they will offer me a lower promotional rate and we both walk away happy. Try it. You have nothing to lose.
Learn to Say No to Your Kids
Look at the real cost of their activities. Limit them to one activity per season, and steer them away from the higher priced sports and traveling teams when you can. If your kid loves to play hockey, it’s going to cost you. But maybe they need not participate all year round.
Spend More Time and Less Money on Your Kids
What your kids really want from you is YOU – your time, your attention, your love. Instead of buying them a distraction, or paying to take them out, try spending time at home watching a movie, playing board games, or doing things together everyone enjoys.
Bring Your Own Lunch to Work
Not only will you save money, but you will eat healthier when you are not tempted by fast-food choices.
Reduce Your Dry-Cleaning Costs
Compare dry cleaning prices and go for the best deal. If same day service costs more, plan ahead and go for the standard charge. Whenever you can, wear clothes you can wash yourself or fold your clothes and hang them up so you can wear them again before paying to have them cleaned.
As you can see, there are many ways you can save money without sacrificing much. Pick a few items and get started today so you can put money back in your pocket right away! Please share anything missed here that has worked for you.