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Life Events

Getting Your Money Straight After Divorce

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

The Marriage Penalty

Divorce is not a happy topic to discuss. It can be a long and expensive process and it’s never something enjoyable – but sometimes, it’s a necessary step in life. As one of my favorite comedians put it, “no good marriage has ever ended in divorce.”

Whether or not you feel you can make light of a crummy situation, you may feel you have a new lease on life after divorce. But that also comes with a load of new financial responsibilities.

Don’t ignore money matters. Understanding your finances and creating a solid plan for life after divorce is a must before you turn your attention to your life after marriage.

The First Step to Getting Your Money Straight After Divorce: Step Back

While you may be ready to take action immediately, you may benefit from first taking a step back. Aaron Britz, a financial planner and founder of Legacy Wealth Management, says he advises his clients to create a “Decision-Free Zone.”

“The purpose is to create an environment that is free from stress-based decisions and free from the influence of others,” Britz explains. “It’s a ‘time-out’ to begin organizing and establish priorities in the form of a list.”

Andrew Mohrmann agrees. Mohrmann is the founder of Modern Dollar Planning and explains that his clients sometimes need help to hold off on big financial decisions immediately after a divorce. He tells a story of one woman who wanted to purchase a new home after her divorce. Mohrmann convinced her to wait until the distribution of assets from the divorce was settled and until she could make a more rational – instead of purely emotional – decision.

“Going through a divorce is an emotional time,” Mormann says. “Give yourself time before making big financial decisions like buying real estate, moving across the country, or completely revamping your portfolio. Keep yourself mobile, liquid and avoid locking into long term commitments.”

Determine Your Financial Priorities

When you’re ready to get your money straight –which means you’re prepared to make rational decisions, not emotional ones – you need to determine what’s highest on the financial priority to-do list.

Britz suggests that you find the right financial professionals to help you navigate the divorce process and the changes to your personal finances that will take place after divorce. “Retain the services of a tax preparer, preferably a CPA,” he says. You may also want to hire a financial advisor and an attorney to ensure your marital settlement agreement is completed correctly.

Next, Britz says it’s time to look at setting up your finances on your own. You’ll need to create a new budget based on your own income as well as your expenses. Then, open new bank and brokerage accounts. “Open new accounts in your name only and close any joint accounts,” says Britz.

In addition, you need to evaluate your consumer debt situation. Britz suggests opening a new account in your name and ensuring any joint accounts are closed. It’s smart to order a credit report about a month after this process is finalized; you can verify that all joint accounts are closed.

Once you’ve handled making these changes, devote some time to sit down and evaluate your new financial picture. You may need to create new plans and goals for your money now that you’re no longer married. Here’s what you need to establish so you can get your money straight and keep it that way after marriage:

  • A system for tracking your spending
  • A system to track any ongoing payments in relation to your divorce, like alimony or child support
  • A budget that reflects your income and your expenses
  • A comprehensive financial plan that includes action steps to reach your financial goals in the short- and long-term.

Handling Issues with Taxes, Investments and Insurances, and Other Accounts

If you filed jointly when you were married, there are tax issues to consider after divorce. Even if you filed separately, your status is still different and if you have children it’s important to consider which parent will claim them on their return.

Within the first year of your divorce, you need to devote some time to evaluating your new tax situation. “It’s probably a good idea to sit down with a professional and have an income tax projection prepared,” says PJ Wallin, a CPA and CFP® at Atlas Financial

“In terms of tax status, you are likely moving from married filing jointly to either single or head of household. Depending on housing status and other itemized deductions, you may also be moving back to standard deduction from itemized.”

Wallin also advises that, after a divorce, W2 employees revisit their withholding form. “You may have too little or too much being withheld based on the status changes,” he explains.

You also need to take a look at your investments and insurances. “Following a divorce, an individual needs to re-evaluate their beneficiary designations on their company benefits, their IRA accounts, and insurance policies to make sure they’re in-line with their wishes and their current situation,” says Erik Klumpp, founder of Chessie Advisors.

Don’t forget to update your coverage as necessary when you’re changing beneficiaries. If you relied on your spouse’s health or life insurance, you need to purchase that protection for yourself. Or if you’re now over-insured, call your provider and make changes so you’re not overpaying for protection you no longer need.

Sophia Bera of Gen Y Planning says that recently divorced individuals need to do this after the divorce is final. “Don’t make these changes while the divorce is in progress because this could hurt your case,” she advises. Bera also points out that investment and insurance accounts are important, but you also need to “re-do your estate planning documents as well.”

Susan Pack elaborates on the issues of estate planning. Pack is a CPA and CFP® at Pomeroy Financial Planning, and says you must give special consideration to your estate plan if you have children.

“Since your financial assets will likely pass to your minor children at your death, carefully consider who would be as responsible with them as you would,” she suggests. “Otherwise a financial guardian will need to be appointed by the court. Do you really want to take the chance that the court would appoint your former spouse as the financial guardian of your children’s assets?”

What to Think About in the Long Term

Your investments and your retirement plan are two of the biggest money changes to consider after divorce. For better or worse, you no longer have another individual to help you plan, save, and manage your money.

But that doesn’t mean you’re completely on your own. If you didn’t handle the household finances before your divorce, start by gaining some basic financial education. Make a list of questions you have about managing money and write down tasks that you’re not sure how to do or handle.

Start by doing some research to educate yourself. You’ll receive a wealth of information in response to a Google search for how to create a budget. Check out personal finance blogs, listen to financial podcasts, and browse your local bookstore (or library, for free) for resources and educational materials.

Then, consider working on a long-term basis with a financial planner. Look for an advisor who is fee-only and who carries the CFP® designation. They can help get your retirement planning on track, help you make wise decisions around your investments, and answer your questions about personal finance.

A pro can also help you achieve your new goals in your new life. Once you get your money straight after divorce, you should focus on achieving what’s important to you and aligning your finances with your values.

Dealing with debt after your divorce? Try our FREE dig out of debt guide.


Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Kali Hawlk
Kali Hawlk |

Kali Hawlk is a writer at MagnifyMoney. You can email Kali at [email protected]

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Life Events, Pay Down My Debt

23 Ways to Get an Engagement Ring Without Going Into Debt

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

23 Ways to Get an Engagement Ring Without Debt

A marriage proposal can lead to much happiness, but it also can mean having to purchase an expensive engagement ring and, subsequently, getting into debt. If the diamond industry has anything to say about your engagement ring purchase, you’ll spend anywhere from one to three months’ salary on a diamond engagement ring. On average, couples spent $4,000 on engagement rings in 2012, according to a 2013 report from Jewelers of America.

However, a little forethought and some creativity can lead to significant savings and even a debt-free engagement ring. Think of it this way: It can be far more romantic to propose with a paid-for ring than to drag the equivalent of a car payment into your marriage. Here’s how you can purchase that ring without breaking your bank.

Set a budget

1. The first step you should take in the ring-buying process is setting a realistic budget for yourself. Don’t just go shopping with no maximum price in mind, as that may lead to you making a purchase you can’t really afford. If you know what you want to spend beforehand, and make sure you stick to that, you are already showing the kind of discipline that can help you avoid serious debt.

Heirlooms are a wallet’s best friend

Jewelry passed from generation to generation denotes sentimentality and fiscal prudence. Ask your family, or your future spouse’s family, if they have any heirlooms they would like to pass on. Keep in mind: Heirloom jewelry will be free, but the service and upgrades can run from a few hundred to several thousand dollars. If you do obtain an heirloom ring, consider these three options.

2. Leave the ring intact (except for resizing and repair).

3. Create a new setting for an heirloom diamond.

4. Incorporate a new band into the old ring design.

Buy your diamond on the cheap-ish

Real diamonds are never truly inexpensive, but knowing what and when to buy can save you a bundle.

5. Shop in the summertime. Because winter proposals are very popular (think Valentine’s Day), it can make a lot more financial sense to buy your diamond in the off-season. The summer months can offer stable pricing at a discount.

6. Buy diamonds shy of critical weights. If you want a full-carat diamond, look for something around .9 carats instead. You’ll get close to the same look at a nice discount.

7. Look before you buy. Compare diamonds at various areas of the color and clarity spectrum. If you can’t tell the difference in the diamond’s appearance, choose the less-expensive option. Also, be sure to comparison shop at different retailers; don’t just go with the first ring you love, as you may find something very similar, for less, at another shop.

Replace the diamond, save the difference

Thanks to the diamond industry’s multi-decade, multi-billion dollar advertising campaign, diamonds remain the most popular stone in engagement rings, but forgoing the traditional gem can save you thousands. Consider these emerging trends.

8. Choose synthetic diamonds. Diamonds created in labs share the same properties as mined diamonds, but they cost up to 75% less than traditional diamonds, and they are a great choice for those seeking to avoid conflict diamonds.

9. Replace a diamond with moissanite. A gemologist will never tell you this, but moissanite (a synthetic material) is the hardest gemstone used in jewelry next to diamonds, and it ranks high on clarity and color scales, too. It’s not a valuable gem, but it is beautiful. (Pro tip: Ask your future spouse before you go this route. Many people do prefer authenticity.)

10. Pick an alternative gemstone. Pearls or jade are popular choices outside of the United States, and garnet and topaz are gaining popularity stateside. If you want something out of the ordinary, consider alternative gemstones, but be aware that some gemstones are actually even more expensive than diamonds.

11. Skip gemstones altogether. Ornamental rings (especially knots) are popular choices for those who want to skip traditional gemstones. Handcrafted gold rings can be purchased for as little as $200 on Etsy.

Forgo tradition

Some of the best ways to save money on engagement rings involve breaking tradition, and some couples are more open to an alternative ring style than others. These are a few ring choices that definitely buck tradition.

12. Wooden rings: Wooden engagement rings occupy a large niche in the market, and can be a cost-effective alternative to precious metals. Wooden rings run anywhere from $50 for simple bands to several thousand dollars for rings that include ornate details and gemstones.

13. Tattooed rings: Some couples chose to get tattoos instead of rings, citing that nothing says forever quite like a tattoo. Keep in mind that this may be a dangerous option, as you will have a much harder time removing a tattoo than a ring if your relationship ends (either before or after the marriage).

14. Leather rings: Leather rings can include braiding, engraving and colored beads, among other stylings, and will certainly save you a bundle compared to a diamond. If you don’t want to go with real leather, faux leather can work as well.

15. Go dutch. If the ring in question is outside of your price range, consider asking your sweetheart to split the cost with you. As you’ll be combining finances after you’re married, this may actually lead to some great money-focused conversations.

Save money now, upgrade later

If your partner has a big diamond taste, but you’ve got a small budget, then consider upgrading later on. Here’s how.

16. Propose with costume jewelry. If you think you can save up for the real ring by the time of your wedding, an inexpensive piece of costume jewelry may be just right for the proposal.

17. Build as you go. Start with a simple band and stone, and add more or bigger gems for anniversary milestones, or upgrade when you can afford it.

Buy used

Consider buying a ring that already has a history. You can have the ring professionally cleaned to give it new beauty and make it “yours.”

18. Visit pawn shops. You may be buying the ring of a recent divorcee, but the savings can be irresistible.

19. Search estate sales. If you regularly shop estate sales, you might uncover a vintage ring at a spectacular price. Rings that aren’t presented with a certificate of authenticity will give you room to negotiate on price, but you may accidentally buy overpriced junk. This technique is best for people with an eye for authenticity.

20. Shop on eBay. Pre-owned rings from eBay can represent about a 30% discount over identical new rings, and many owners provide certificates of authenticity.

Creative ways to get cash

Whether you’ll spend a few hundred dollars or thousands, an engagement ring doesn’t have to mean big debt. Consider a few creative ways to save the cash you need to pay for a ring in full.

21. Sell your memorabilia. Your partner may not be too enthusiastic about your KISS memorabilia, or your 27 signed hockey jerseys. Selling these to help pay for an engagement ring will be a double sign of your love.

22. Save up, way in advance. If you’re not currently in a serious relationship, but you think you’re the marrying kind, consider setting aside some cash for a future ring purchase. While some people may find this a strange thing to do, there is no harm in being over-prepared. If you don’t end up using the money to buy a ring, it will be on-hand for other potential purchases (think a wonderful vacation, or a luxury item you really want).

23. Get a side hustle. People are increasingly taking on side hustles to earn extra cash, even if they have full-time jobs. This can include selling your artistic creations on Etsy, becoming an Uber or Lyft driver or writing freelance articles. Then you can put all the extra money you earn into an account for a ring.

Consider a personal loan

It is definitely ideal to be able to purchase an engagement ring without going into debt at all. However, if you simply have to finance at least part of the ring’s purchase, you might consider a personal loan, as you may be able to get a better interest rate than with a credit card, depending on your own credit and where you are able to obtain your loan.

Bottom line

Getting married can be an expensive undertaking, and you don’t want to put yourself in a difficult financial place just by purchasing the engagement ring. Keep in mind the alternatives to the traditional pricey diamond, and also remember that the love you share with your partner should be far more important than buying a ring with a sky-high price tag. Avoiding debt as much as you can also means you’ll be starting off your new marriage on a financially healthy note.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Hannah Rounds
Hannah Rounds |

Hannah Rounds is a writer at MagnifyMoney. You can email Hannah here

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Life Events, Mortgage

What Is Mortgage Amortization?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Getty Images

One of the biggest advantages of homeownership versus renting is each mortgage payment gradually pays off your mortgage and builds equity in your home. The difference between your home’s value and the balance of your loan is home equity, and your equity grows with each payment because of mortgage amortization.

Understanding mortgage amortization can help you set financial goals to pay off your home faster or evaluate whether you should refinance.

What is mortgage amortization?

Mortgage amortization is the process of paying off your loan balance in equal installments over a set period. The interest you pay is based on the balance of your loan (your principal). When you begin your payment schedule, you pay much more interest than principal.

As time goes on, you eventually pay more principal than interest — until your loan is paid off.

How mortgage amortization works

Understanding mortgage amortization starts with how monthly mortgage payments are applied each month to the principal and interest owed on your mortgage. There are two calculations that occur every month.

The first involves how much interest you’ll need to pay. This is based on the amount you borrowed when you took out your loan. It is adjusted each month as your balance drops from the payments you make.

The second calculation is how much principal you are paying. It is based on the interest rate you locked in and agreed to repay over a set period (the most popular being 30 years).

If you’re a math whiz, here’s how the formula looks before you start inputting numbers.

Fortunately, mortgage calculators do all the heavy mathematical lifting for you. The graphic below shows the difference between the first year and 15th year of principal and interest payments on a 30-year fixed loan of $200,000 at a rate of 4.375%.

For the first year, the amount of interest that is paid is more than double the principal, slowly dropping as the principal balance drops. However, by the 15th year, principal payments outpace interest, and you start building equity at a much more rapid pace.

How understanding mortgage amortization can help financially

An important aspect of mortgage amortization is that you can change the total amount of interest you pay — or how fast you pay down the balance — by making extra payments over the life of the loan or refinancing to a lower rate or term. You aren’t obligated to follow the 30-year schedule laid out in your amortization schedule.

Here are some financial objectives, using LendingTree mortgage calculators, that you can accomplish with mortgage amortization. (Note that MagnifyMoney is owned by LendingTree.)

Lower rate can save thousands in interest

If mortgage rates have dropped since you purchased your home, you might consider refinancing. Some financial advisors may recommend refinancing only if you can save 1% on your rate. However, this may not be good advice if you plan on staying in your home for a long time. The example below shows the monthly savings from 5% to 4.5% on a $200,000, 30-year fixed loan, assuming you closed on your current loan in January 2019.

Assuming you took out the mortgage in January 2019 at 5%, refinancing to a rate of 4.5% only saves $69 a month. However, over 30 years, the total savings is $68,364 in interest. If you’re living in your forever home, that half-percent savings adds up significantly.

Extra payment can help build equity, pay off loan faster

The amount of interest you pay every month on a loan is a direct result of your loan balance. If you reduce your loan balance with even one extra lump-sum payment in a given month, you’ll reduce the long-term interest. The graphic below shows how much you’d save by paying an extra $50 a month on a $200,000 30-year fixed loan with an interest rate of 4.375%.

Amortization schedule tells when PMI will drop off

If you weren’t able to make a 20% down payment when you purchased your home, you may be paying mortgage insurance. Mortgage insurance protects a lender against losses if you default, and private mortgage insurance (PMI) is the most common type.

PMI automatically drops off once your total loan divided by your property’s value (also known as your loan-to-value ratio, or LTV) reaches 78%. You can multiply the price you paid for your home by 0.78 to determine where your loan balance would need to be for PMI to be canceled.

Find the balance on your amortization schedule and you’ll know when your monthly payment will drop as a result of the PMI cancellation.

Pinpoint when adjustable-rate-mortgage payment will rise

Adjustable-rate mortgages (ARMs) are a great tool to save money for a set period as long as you have a strategy to refinance or sell the home before the initial fixed period ends. However, sometimes life happens and you end up staying in a home longer than expected.

Knowing when and how much your payments could potentially increase, as well as how much extra interest you’ll be paying if the rate does increase, can help you weigh whether you really want to take a risk on an ARM loan.

The bottom line

Mortgage amortization may be a topic that you don’t talk about much before you get a mortgage, but it’s certainly worth exploring more once you become a homeowner.

The benefits of understanding how extra payments or a lower rate can save you money — both in the short term and over the life of your loan — will help you take advantage of opportunities to pay off your loan faster, save on interest charges and build equity in your home.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Denny Ceizyk
Denny Ceizyk |

Denny Ceizyk is a writer at MagnifyMoney. You can email Denny here

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