The BIG Question

Your divorce is over, or maybe it will be soon. Your mind is reeling and you are confronted by yet another decision: Save or pay-off debt. What do I do now?

Can’t someone else decide? Or make it all go away? I’ve had those thoughts myself, and  divorce can be an opportunity to start over and we get to be in control this time; to get educated to create goals, a vision for our new life. So let’s take it slow..

1. Know the Current Situation

Before deciding which to embark on, it’s important to know a few things, such as:

• How much do I owe?
• How much do I need in additional savings for my goal?

If that is a retirement goal, make sure to include inflation on your expenses and healthcare costs. See “I want to be a millionaire (or do I?)” for additional information in this. Approximately 60% of women alive at 62 can expect to live to age 90 –– so make sure you use a realistic age.

• How much disposal income do I have to put towards these goals?

2. Know the Pros/Cons of Each Option

After identifying how much can be put towards reaching these goals, we want to understand the pros/cons of each option. Some considerations could be: Would paying off debt help my credit? Is having good credit right now important to a home refinance in my divorce settlement or possibly obtaining a car loan? What am I paying in interest? How many years do I have to make up the gap in retirement assets? What could I conservatively earn in the market with my risk tolerance in the years leading up to retirement?

Working with a financial coach that has tools to help you understand your choices can make the decisions less scary and daunting. I know this can be particularly true for the post-divorce clients I work with, that took the back seat on finances during their marriage.

3. Know That the Decision Is Emotional

Lastly, as I shared in the TransAmerica Article “SHOULD YOU PAY OFF DEBT OR SAVE FOR RETIREMENT?”,  remember this process is emotional. Sometimes quick wins in paying off debt can help empower us and keep us committed to our plan, which is so important when we are trying to make strides in our finances. This is not a “one” or the “other” choice; Debt Vs. Saving. Your plan can be a combination of both.

Look, the truth is that, the success of financial planning, coaching, advice and goal setting really has more to do with financial behavioral change than having a great plan. No plan is great if it’s never acted upon or implemented.

As part of Michelle’s commitment to families, she is a leader for “What Everyone Should know About Divorce” in N Phoenix/N Scottsdale and also supports the West Valley.

This information is not meant to be construed as financial, tax, or law advice. Always speak with a professional in the applicable area of expertise to address you specific situation and concerns

A trained Financial Professional in Divorce Planning and a background in taxes can help with these tasks.

As part of Michelle’s commitment to families, she is a leader for “What Everyone Should know About Divorce” in N. Phoenix/N. Scottsdale and also supports the West Valley. www.secondsaturdaynphoenix.com