Divorced Mom Asks: How Do I Rebound Financially?Lynn, a 53-year-old Florida nurse and mother of two, has navigated several treacherous years. In 2007, she and her husband bought their dream home in a gated community after selling their smaller house at the top of the real estate market. A year later, after 28 years of marriage, he walked out.

"I know it's a cliché, but it was a mid-life crisis," Lynn says. "He wasn't a bad person, he was just unhappy and unable to articulate it. He got up from the couch one day and started screaming and punching holes in the wall."

As the South Florida housing market collapsed, they dumped the place in a short sale, which required writing a check to the bank. Lynn came away from the marriage with about $40,000 in credit card debt and medical bills from the treatment for her daughter's brain tumor. Her credit score plunged to 540, and in order for her to purchase a car to get to work, her 19-year-old son had to co-sign the auto loan, which had an interest rate of 21%.

"It seemed easy to bag it all, file bankruptcy and start over," says Lynn. Instead, she began working 14-hour overnight shifts to maximize her overtime pay, pushing her annual income over six figures.

A Dysfunctional Financial Upbringing


Splitting up makes a mess of your finances. Overall wealth declined an average of 77% for people who divorced, according to a study in the Journal of Sociology that tracked the financial and marital status of more than 9,000 people from 1985 to 2000.

Lynn wants to move to the Midwest, finish her bachelor's and master's degrees, and escape the brutal overnight shift. "I need to get into school so I have choices," she says. "[Older] people come to work and they look like soldiers falling apart."

She feels daunted by her lack of financial education, which she attributes partly to her childhood. "I came from a very dysfunctional, frenetic household. My dad was a baseball player and my mom was a model," she says. "My dad was a gambler, so it was a very unstable household. We would live lavishly in an enormous home and then there would be no electricity."

Getting the Tools to Craft a Plan

Given her income, Lynn can bounce back, says Ginita Wall, a certified financial planner and founder of the Women's Institute for Financial Education and Moneyclubs.com. "If she were 95, I'd say tread water and die with debt, but at 53 you still have the opportunity to get out of it," says Wall. Moreover, even if she filed for bankruptcy, the court would have set up a repayment plan based on her income, although interest on the debt would be waived.

So far, Lynn has tackled her debt alone, following advice she found online. "I have made some progress, but very slow," she says. "On payday, when the money hits my account, I'm up at 5 a.m. paying my bills, sitting there like a miser with my calculator."

For a free, do-it-yourself pay-down plan, Lynn could try MoneyClubs' 21-day makeover program. Participants receive a daily email with a small step to do in 15 minutes or less, adding up to a pay down plan at the end of three weeks. Other options are the ad-supported Payoff.com or Debtgoal.com, a subscription tool that costs $15 a month.

Over the last three years, Lynn refinanced the auto loan at 8% at her local credit union; negotiated lower interest rates on her credit cards; and paid down about 25% of her outstanding debt. She saved $4,000 in an emergency fund and contributes 10% of her pay to her 401(k), which offers a 2% match and now has a balance of $63,000. Her credit score has climbed back to 650.

Taking the Long View


Carole Peck, a Florida certified financial planner who specializes in women in transition, recommends Lynn max out her 401(k) even if the investment return is less than the interest she is paying on her credit cards.

"The 401(k) reduces taxable income and if she's in the 28% tax bracket, she's saving 28% on that money right off the top, plus the matching funds," says Peck. "It's also disciplined saving. I have found when people take a break in saving in their 401(k), it's a long break and it's hard to get back where they were, because something else always comes up."

Peck advises Lynn to stay put and pay off as much debt as possible before relocating. "She should stick it out as long as she can in Florida, it's her best opportunity to pay off the debt," she says. "Going back to school, she will not able to work overtime. If she can hang in there a little longer, that would put her in that much stronger position when she gets to the Midwest."

If Lynn can't find an employer willing to pay her tuition, she should look into federal student loans. "That probably feels like, 'here she goes again, increasing the debt,' but I really like my clients to keep liquidity in this economic environment," says Peck. A job loss might require tapping retirement accounts early, paying penalties and taxes, and creating "a downward spiral."

Finally, Lynn should wait as long as possible to collect Social Security to boost her benefit. "If she can wait until 70, even working part-time to delay taking Social Security, that could be a big help in long-term retirement plan," says Peck.

Struggling with your own personal finance situation? I welcome your questions but it's also about your wisdom, ideas, and experiences that may help other readers. Email me at laura.rowley@teamaol.com. You can also follow me on Twitter @MoneyHappiness.

Content Solely Informational:
Content on this site is for informational purposes only and is not intended to be investment advice, or any other kind of professional advice. You must determine for yourself or in consultation with a professional whether any financial strategy or advice is right for you.

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