Open Accessibility Menu
We are open! While our physical offices are closed, our team is working from remote offices using secure technology platforms including video conferencing. Learn More
Committed To Developing The Best Solution For Your Family

You’ve Received Your Divorce Settlement – What Next?

The divorce is final, and you are fortunate. You have received your share of your marital assets. What do you do next? Did you know that many divorcing people burn through their settlement money at a rapid rate? Without up-front thought, many people end up with almost none of the settlement remaining after two years. Worse yet, some have accrued even more debt than they started single life with. And this is just one of many common personal challenges associated with divorce.

The reasons for this vary. Some individuals use money to help them with the emotional turmoil they may be going through. Others are not accustomed to having or handling larger sums of money. Money can seem to burn holes in some pockets, and can drift away much quicker than most people realize. Regardless of the reason, emotions can prevent many people from making good financial decisions. How can you avoid this?

Take the time to review the following areas and begin planning for you future.

  • Consider having a cooling-off period where no major financial decisions are made. Experts involved in counseling individuals who have received “sudden money”, such as inheritances or lottery winnings, advise that their clients make no important financial decisions for 6 to 12 months. This gives the individuals time to plan for their future and not rush into decisions based on emotions.
  • Be wary of relatives and friends who may request loans or expect gifts. If your settlement contains a significant amount of cash, some acquaintances or family members will have no qualms about requesting monetary assistance. Most financial experts suggest that you wait, if possible, to loan money or provide gifts until after you have assessed your own financial situation and you can consider the relative’s or friends’ requests in less emotional time period. It is okay to tell the requesters that your money is “tied up” and you are in “time out” until you have finished your long term planning.
  • Estimate your cash flow, one of the most important causes of anxiety in most people. Set up a worksheet, on paper or in a computer program, using three columns. The first column contains your fixed expenses thatmust be paid regardless, such as your mortgage, insurance, taxes, car payments, etc. The second column should contain your flexible expenses that are required for living but may vary and over which you have some control, such as food, dining out, clothes, and others. The third column should contain expenses which are truly optional and on which you may or may not elect to spend, such as vacations, entertainment, and social activities. Most of these expenses are probably identified in your Financial Affidavit that you were required to prepare for your divorce. Summing these figures can give you a working range of your required monthly cash flow requirements.
  • Understand your lifestyle changes can impact your finances. Many couples have found that it is difficult to live on two paychecks, and with a divorce, each will be living on a single paycheck, with some duplicated living expenses (two mortgages or rent payments, two telephone bills, etc.) Returning to the workforce may require day care expenses for the children, lunches out, additional car expenses, and purchase of additional work clothes. For some, entertainment expenses may increase. Be certain to monitor your cash flow situation monthly to determine if it has changed, and if you need to adjust your spending habits.
  • Taxes can play a large role in finances. You will want to contact your tax consultant to determine if your income tax withholding should change, based on your marital status, credits for children (if any), receipt or payment of spousal maintenance (if any), etc. Additionally, the sale of a house or investments can trigger capital gains or other taxes. For example, if you sell the $200,000 house you purchased in 1995 for $900,000 you very likely will owe taxes on the gain. Discuss how much you will owe with your tax consultant and be certain to set aside an appropriate amount to cover this expense.
  • Retirement accounts represent an additional “bonus” because of the tax deferral benefit. These are very valuable assets and because of the tax implications, require special care. The IRS allows distributions from some types of retirement accounts that are free from the 10% penalty for early withdrawal, if accessed in the correct time period. Income tax is still required to be paid, so if you have made such withdrawals, be certain to set aside additional funds to pay taxes. Otherwise, most financial advisers recommend rolling over (in a trustee to trustee transfer) the retirement accounts to accounts of the recipients choosing. See your financial adviser for assistance, if you need it.
  • Having an emergency fund is critical even if you currently have sufficient funds available. Most financial advisers recommend 3 to 6 months of expenses, and for some, even more if their income situation is somewhat fragile, or they receive income erratically. Always keep such funds in accounts such as money market funds, certificates of deposits, or savings accounts.
  • Growing your money is even more important after the divorce. Because you have only one income on which to rely, it is important to ensure that your current funds are working for you. Additionally, planning for your retirement is critical. While it is natural to be concerned about the short term, planning for your future is at least as important! If you don’t have the knowledge about investing, take classes, read books, do research, or ask for help from your financial advisor.

Getting a divorce entails a significant amount of work and financial assessment. Let’s say you have reviewed and regularly monitor your cash flow, have fended off relatives and friends looking for loans, and reviewed your lifestyle changes. Additionally, you’ve assessed your tax situation, rolled over your retirement funds to your own account, developed an emergency fund, and situated your money so it can grow for you and your retirement. You are now on the path to a successful future and have made your divorce settlement work for you!

See What Our Clients Have To Say

  • I've been very impressed with Harris Family Law through this whole process. - Pat
  • Your kids will thank you. - Michael
  • My lawyer saved me from myself. - Jeff
  • I’m starting my new life now. - Scott
  • With help from some great support resources, we are stable, happy, and moving forward to a great new life. - Amy
  • Once my legal team stepped in, things rapidly began to change. - Anonymous
  • After hiring my lawyer, I am certain that I made the right choice. - Joel
  • Your fast responses to all of our questions and your concern for our situation really made us feel at ease. - Chris
  • I've been very impressed with Harris Family Law through this whole process. - Pat
  • You have been nothing less than fantastic thank you so much and look forward to never having to work with you in the future - Nate

We Care about our Clients, our Team and our Community

  • Our Clients You come to us for guidance, support and assistance at a trying time. We take this responsibility very seriously. You deserve a high level of service and excellent legal representation. WE CARE about your challenges, solutions and process for resolution.
  • Our Team We celebrate the many individual strengths that make up The Harris Law Firm team. We encourage growth while also promoting a collaborative working environment. WE CARE about our team and strive to ensure an environment of collegiality, appreciation and consistent professional development.
  • Our Community The Harris Law Firm supports the legal, local and international community. Through deliberate strategic giving efforts, we work together to bring strength, happiness and empowerment to Colorado and beyond. WE CARE about our role in the world around us.

Contact Our Colorado
Family Law Firm

If you are in need of a compassionate, skilled, and experienced Colorado family law attorney, The Harris Law Firm can help. If you have a legal question about a domestic relations issue, including divorce and the allocation of parental rights, please complete our contact form below. A member of our legal team will be in touch with you soon to arrange a private consultation with one of our experienced attorneys. Together we can find a resolution.
  • Please enter your first name.
  • Please enter your last name.
  • This isn't a valid email address.
    Please enter your email address.
  • This isn't a valid phone number.
    Please enter your phone number.
    You entered an invalid number.
  • Please enter a message.
  • Please make a selection.