A few weeks ago I wrote about my interview with Kimberly Palmer and her book, Smart Mom, Rich Mom. Readers had a chance to win a copy of the book by sending in a personal finance question. The sender of this question got the book:
Having recently been through a dreaded “D” of my own (Divorce) I’m curious as to what advice you have for a single mom to pay down debt and boost her credit score from the negative affects of a short sale when half of my check is going to childcare and I’m not receiving any child support from my ex? I have a budget but feel like I’m treading water and unable to gain any real traction.
This particular question involved a mother as provider of both cash and care for her kids, with an eye on her financial future, dealing with one of the common destroyers of economic security. It’s a position millions of women will find themselves in. Some of the suggested actions are moves all women should think about, whatever the condition of one’s marriage. They may make sense even if divorce never happens to you.
Here is Kimberly’s reply:
Divorce is tough financially for so many reasons – not only does it often impact the income dynamics of the household, but expenses usually go up, as well. You also have to rethink insurance policies, estate plans, retirement beneficiaries and more. The issues you bring up – off– loading debt and protecting your credit score while managing a tight budget – are among the most urgent. First of all, you want to be sure your credit score is protected from any actions of your ex by going through all your accounts, including any loans and credit cards, and making sure they are in your name only. Unfortunately, credit scores can be ruined by former partners if the credit cards and loans are still shared.
After you get things separated, you can make slow and steady progress toward paying down the debt — not easy when you’re also paying for child care. I don’t know the reasons behind the lack of child support payments, but that could be something to explore legally, with the help of a lawyer.
The main thing to focus on now, as you navigate this transition, is to avoid building up further debt — so if you are treading water, that’s an accomplishment in itself. Then you can slowly pay off the debt over time — and move on to more fulfilling pursuits, like saving for college and other goals.
Pretty heavy stuff, but worth thinking about.
In my initial post about Smart Mom, Rich Mom, Kimberly highlighted the importance of not reducing our own financial security when we’re caring for our parents. Now that old age can last for decades, many families scramble to cover basic expenses for a longer lifespan. I was reminded of Kimberly’s warning when I saw this article in the Washington Post, Don’t let your parents drag you under financially. Our sense of responsibility to those who cared for us can be strong. But taking care of them financially, when it draws down our own savings, increases the likelihood that we’ll be dependent upon our own children one day. That’s not a family legacy anyone wants to hand down.
Now that I think about it, I don’t really need to be rich. Smart mom, financially secure mom is good enough for me.
‘Til next time,
Your (Wo)Man in Washington