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What You Should Do After
Divorce?
After you've extricated yourself from any loans, bank
accounts, and credit cards you may have shared with
your ex, you can turn your attention to building up
your assets and financial security. Here are three
ways to prepare yourself for a fearless, confident
future:
Build an emergency fund.
Okay, so you're still feeling raw and maybe a little
scared to go solo. Focus on giving yourself a security
blanket. Figure out how much you would need to live on
for eight months, and then sock that amount away in a
savings account. Once you have those savings, you'll
be taken care of no matter what happens—a layoff, a
loved one's illness. If you received a payout in the
divorce, you may have your peace-of-mind fund already.
If not, don't stress. Just set up a monthly direct
deposit—have the money transferred from your
checking account into a savings account (www.emigrantdirect.com,
with a 3.5 percent interest rate, is a great place to
store your cash).
Get the match.
If you work for a company that offers a 401(k) or
403(b) retirement plan and kicks in a matching
contribution, you must join and contribute enough to
get the match. I've said it before: That matching
contribution is no different from a bonus. If you find
your plan's menu of fund choices intimidating, see if
it offers an all-in-one fund (it's typically called a
life-stage fund). This is geared toward your age and
will have a mix of stocks and bonds appropriate for
you. If there's no such fund, look for an index fund
that mimics the performance of a large basket of
stocks, such as the S&P 500 or the Wilshire 5000.
Fund a Roth.
If your income is below $95,000 a year, you're
eligible to fully fund a Roth IRA (this year you can
put in $4,000 if you're under 50 and $4,500 if you're
50 and over). Assuming you have at least ten years
until you retire, a no-load index mutual fund, such as
the Vanguard Total Stock Market Index Fund, is a great
choice. You don't get a tax break when you invest in a
Roth, but when you retire and pull the money out,
there will be no tax on your contributions or your
earnings. So think of your Roth as a standby emergency
fund.
By Suze Orman
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