Savita, 38, is a recently-divorced mother of Ishita, 8, and Ayaan, 5. Savita has been a homemaker ever since her daughter was born and now, after the divorce, has only meagre savings to lean on. While the alimony has provided some relief, legal battles over custody, school fees, rent, and monthly expenses have stretched the finances immensely.
Along similar lines, Surabhi, 34, is a working professional in the IT industry and is the mother of two lovely daughters- Rishika, 5, and Miraya, 3. They are the joy of Surabhi's life, but Miraya has been diagnosed with cerebral palsy, whose treatment, medication and maintenance constantly demand funds. The alimony and Surabhi’s salary are barely enough to make ends meet, with hardly any savings every month.
There is just one thought that gives sleepless nights to both these mothers :how do we secure our children’s future and ensure that we have a dignified and comfortable life?
That’s what we’re here to answer.
If you find yourself in the same predicament ; here are a few measures that you can take to get a grip on your finances.
Familiarise yourself with the financial situation
The first step to getting your life back on track after a divorce is budgeting. It is possible that, for a majority of your married life, your ex-spouse handled the finances and that there were some aspects that you are not very familiar with. The best thing to do in this case is to go over all your assets and liabilities and chalk them out clearly, say, on a spreadsheet.
Similarly, listing all your expenses in their order of priority and listing all your sources of income in the order of their permanence goes a long way in helping you get a clear picture of your finances.
The next step would be to minimize or cut out completely, if possible, such expenses which can be avoided without compromising on ones’ quality of life.
If you find that your finances are too complex or you are dealing with puzzling financial scenarios, it is always advisable to consult a financial advisor.
Focus on goal-based investing
Depending upon your long-term goals, like the higher education of your children and their marriages, and short-term goals, such as the schooling of your children, travel goals, and the acquisition of assets like a two-wheeler or a car, you can do goal-based investing in Mutual Funds with the savings that you may have.
As less as Rs 1,000 per month can yield the right amount of funds at the right time, thus ensuring that your money grows and is available for each milestone, be it your child’s college education or buying your first car.
Create an emergency fund
An emergency fund is an amount of money that is to be used only for some financial contingency. Generally it is recommended to have an amount equal to at least 4-6 months of your expenses in your emergency fund. It is a good idea to create an emergency fund if your cash inflows are not large and if you do not have extensive insurance cover (say, you do not have a health insurance policy - although it would be highly recommended to have one); you can deposit small sums of money whenever you have surplus funds to create your emergency fund and then replenish it after you have used it.
A wise move here would be to invest in liquid funds via SIP. They yield steady returns and some of them offer instant redemption, allowing easy access to your money when you need it the most. Such preparedness will ensure that a contingency does not destabilise your finances or derail you from achieving your long term financial goals.
It is possible that your ex-spouse changes the names of the beneficiaries of his life insurance policies, or that you were earlier covered in a family-floater health insurance policy. Either way, the divorce may change things on the insurance front. It is thus prudent to purchase a health cover as well as a life insurance policy.
This will not only help you fortify your finances for health emergencies but also help you save some money on taxes. Besides that, you should also consider changing the beneficiaries of your life insurance policy if you already have one, in the light of the divorce.
Prepare for your retirement
Many spouses depend on each other for the days of their retirement and often have combined investments to take care of the expenses of their old age. However, there can be considerable upheaval in this regard because of a divorce, and it is possible that you are left with a frugal cushion of funds for your retirement. Therefore, preparing for your investment through systematic savings in fixed deposits or Mutual Funds (depending on your risk profile) is a good option. An even better option is to spread your retirement preparation across several years, using goal-based investment.
Divorce can be financially stressful and emotionally grueling for all parties involved. In such circumstances, it is very important to get yourself together and power through. While at first, your finances may feel shaky, ensuring minimal levels of debt and regular savings of small amounts will go a long way in helping you recover. It is always a good option to consult a financial advisor in this regard, as they may be able to use their expertise in analyzing your situation and give you the best possible plan to attain a secure financial position.
If you have dependents, it is all the more important to tread carefully with respect to finances. Regular savings, sound goal-based investments, and a good insurance policy cover to take care of unforeseen circumstances can help you achieve your financial goals over time even if you are starting small..
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