Often a dream life doesn’t necessarily pan out in the same manner for some couples, bringing them to the more abrupt pain of separation or divorce. However, coming out of a marriage may not necessarily be good for an individual’s finances. From Alimony to Child Support, an individual may have to take up some financial responsibilities even after a divorce. So, here’s a six-point guide for a divorced father that can help them meet their financial obligations:
1. Emergency Funds
An average individual requires up to 6 months of expenses in emergency funds. As a divorced father, one may have to keep at least a year’s expenses in emergency funds to take care of child support, maintenance and the like. It is best to keep this corpus in liquid funds and keep it handy and accessible in case of emergencies.
2. Education Expenses
In some cases, the law may ask the father to take care of all educational expenses, especially when the former spouse has been a home maker. For someone who has young kids and is divorced, it is best to start an education kitty taking rising costs of higher education into account as early as possible. One can invest this amount in a good portfolio of equity mutual funds depending on the time horizon, especially when children are under 5 years old.
Either you may want to build a separate corpus for maintenance funds or, you could give standing instructions to your bank to transfer this amount into your ex-spouse's bank account. Having some money saved in short term debt funds might make this somewhat easier. You can consider systematic withdrawal plans in this case, to move the money to your bank account at regular intervals.
3. Maintenance Expenses
An unavoidable expense for many, maintenance amount can occupy a major mind-space for divorced fathers. Depending on the terms agreed, one has to ensure timely payment every month. Either you may want to build a separate corpus for maintenance funds or, you could give standing instructions to your bank to transfer this amount into your ex-spouse's bank account. Having some money saved in short term debt funds might make this somewhat easier. You can consider systematic withdrawal plans in this case, to move the money to your bank account at regular intervals.
Post Divorce one may or may not want to keep their spouse as a nominee on the life insurance as a beneficiary. If you want your minor child as a nominee, you may want an appointee. An appointee is someone whom you have given the power to handle the property (funds in this case) on your behalf, when you are no longer around.
5. Health Insurance
It is good not to ignore health insurance for children and self. This will cover any contingencies irrespective of whether the custody of children is with the father or not. Get insurance for an amount that is on the higher side, to cover most needs, even if your employer offers you medical insurance.
6.Investments and Retirement
A separation can be hard for spouses not just emotionally but also financially. One should revisit all financial plans based on the terms of divorce and the like. This should not put one’s own plans such as that of retirement on a back burner. It is essential to keep building the retirement corpus on the side using a good long term oriented portfolio. One should also revisit this portfolio at regular intervals. Afterall it’s moving on with one’s individual life, and it’s best to do so with finances as well.