Divorce is something no one wants to prepare for, but in some cases, it is the best decision for a couple. The steps you take before and during your divorce could help you maintain your financial health and your sanity. It’s rare for a divorce to come as a sudden surprise, so it’s essential to plan ahead so you can come out of it healthy and happy. Here are ten things to focus on related to your finances when you find yourself about to go through a divorce.
Partner With Your Lawyer
The most valuable advice for any stage of a divorce is to consult your lawyer. Even if you and your spouse are divorcing amicably, money can make things tricky. During a divorce, you need to protect yourself and keep things simple. No matter what your financial situation looks like, a lawyer advocating for you can help you make the best decisions.
Open a New Bank Account
Once you’ve decided to separate or divorce, it’s best to open separate bank accounts. Over time, you and your spouse will need to take steps to start over as distinct individuals instead of a married couple. If you have direct deposit for your paycheck, you’ll need to update your bank account information. Separate accounts can make it easier to adjust to new living arrangements.
Consider Closing Any Joint Accounts
It’s also essential to break up with your joint account during a separation or divorce. Some married couples continue to use a joint account during the separation process, but this can be a bad idea. During a divorce, feelings may be tense, and in a joint account situation, one spouse may be tempted to drain the funds out of spite. Closing the account and dividing the monies equally is the best way to avoid this situation.
Check Your Credit
An expensive divorce can be devastating to someone’s financial health. Before starting proceedings, be sure to check your credit to make sure you know where you stand. Go for the free annual credit report everyone is entitled to make sure you don’t have any new accounts you don’t know about. Sometimes, an estranged spouse may make a poor decision that could impact your creditworthiness.
Account for All Debts
Before you sit down with your former spouse and make an agreement for the final divorce, you will need to sit down and figure out all of your debts. In most cases, the debts will be divided up between the spouses before the divorce is issued. Some debts may not be part of the divorce agreement, so make sure you are aware of what you and your spouse owe before you start proceedings.
Get an Agreement
You and your lawyer can also agree in the initial stages of the divorce and before things finalize. In some states, you can put together a separation agreement that dictates matters such as child support, alimony, and spending. Getting this in writing can help avoid disputes later down the road.
Track All Assets
When your divorce is finalized, you will also have to split your marital assets evenly. This includes items such as homes, cars, furniture, and jewelry. It’s important to make a list of all of the things you and your spouse own once you have decided to part ways. Talk to your spouse about smaller items, such as electronics, sentimental items, and home décor and agree in writing for everything.
Change Your Will
When you leave your spouse, you also have to update things such as your will and your life insurance policy. Many divorced people forget about these things and are surprised to find out their former partner is still listed as a beneficiary on many things years later. Your retirement accounts, pensions, wills, and insurance premiums may need to change when your marital status goes through a transition.
Consult a Financial Advisor
A financial advisor is another top professional you should seek out during this tough time. Many divorcing families struggle with balancing the new cost of lawyers, separate households, and managing their money on their own. Having an un-basis third party to help guide you, might be the extra help you need to stay in control. If the cost of a divorce becomes overwhelming in your current budget, a short-term loan, like something from Don Gayhardt led CURO Financial Technologies, could help you get back on your feet and start your new single life. Many divorcing families struggle with the cost of lawyers, separate households, and fees.
Prepare for Anything
Most of all, you have to prepare for anything during a divorce. Feelings can be strong and dramatic during this time of your life, and you have to focus on the end goal if you want to get out healthy and happy. Stick to a reasonable budget to account for the high cost of ending your marriage.
Divorce can be one of the most stressful things to happen in life, but you don’t have to let it destroy your finances. Stay strong and make smart decisions with your money, so you survive.
Often financial problems lead to marital issues. I've seen in occur with a close friend and a family member. If you and your spouse can develop open communication about money early on in a relationship and talk about common money goals, there's a good chance all of this can be avoided. It's up to the couple to work as a team, to listen, compromise, and develop a money plan to be successful in the long term.
Brian is a dad, husband, and an IT professional by trade. A Personal Finance Blogger since 2013 who, with his family, has successfully paid off over $100K worth of consumer debt. I want my three children to handle money better than I ever did at a young age. I have been teaching them as much as I can for the last 10 years. My goal is to continue to champion the financial literacy message and then why I created the “How To Rock Your Money” book. To help teenagers navigate their financial futures. I hope my family’s story of paying off over $100,000 worth of debt will inspire and motivate you to take control of your money. He blogs at BrianBrandow.com