26 Financial Steps To Prepare You For Divorce
Apr 05, 2022
Preparing your finances due for a divorce can be challenging. The process is emotional and messy - it can take years to untangle the two people's money, even before spousal or child support has been awarded or your post-divorce budget. Yet, while every divorce is unique, there are usually some common threads that you'll need to prepare yourself for if you're getting divorced.
Here are 26 tips on how to get started.
- Be wary of well-meaning advice. Divorce laws vary by state, so be cautious of advice that seems to be a one-size-fits-all solution.
- Get your credit in order. Even if you're considering bankruptcy or debt consolidation, it's essential to have a clear picture of where your money is going. And see what other options you could have as bankruptcy should be a last resort.
- Get your retirement in order. If you're getting divorced, that means one (or both) of you will be staying home while the other brings in income - and it's essential to plan for how this will impact your future finances.
- Save money wherever possible without impacting the quality of life or being irresponsible with your debt.
- Get a clear picture of your current financial situation. If you're not sure where to start, hire a financial coach, an accountant, or someone familiar with divorce law in your state.
- You may want to consider hiring help for daily tasks to have the time and energy available needed to properly care for yourself, your children, and your finances.
- Think about the future of both parties - not just yours. What will happen if you remarry? If your ex does? If one of you becomes ill or disabled? No matter how unfair it seems now, remember that these things can happen to anyone at any time.
- Get started on dividing assets. It might feel like the last thing you want to do, but it's worth getting started on now - your attorney will thank you later if they don't have to rework everything once it becomes clear that some of what was agreed upon is no longer legally possible or feasible.
- Make sure all joint accounts are closed before you file for divorce. If you don't, the court may find that your ex-spouse is entitled to a share of those accounts and any investment gains they contain.
- Look out for yourself financially if things aren't going well in court - especially if there are limits on how much child support or alimony you can receive because of the income from your spouse.
- Be aware of the tax implications and how they might impact you, especially if one of you is receiving alimony payments, child support, or both.
- While some things will be more difficult after a divorce (especially financially), it's not impossible to recover or rebuild - even with limited resources.
- Remember that things will get better, and you can rebuild your life after a divorce - even if it takes time and effort to do so!
- Make sure all joint accounts are closed before filing for divorce. If not, the court might find that you're entitled to a share of those accounts and any investment gains they contain.
- Also, make sure that all of your passcodes and computers are protected from anyone accessing your information.
- Avoid well-meaning advice from friends and family, as each divorce is different. Only you know what's best for you and your family.
- Make a list of your assets and debts - it's essential to know what you're working with before approaching an attorney or filing for divorce. This will also help them in the settlement process, as they'll see exactly where each piece of money is going currently. Get copies of all financial statements about you and your spouse.
- List out everything you spend money on - the more specific, the better. Including groceries, gas for your car(s), rent or mortgage payments, etc., and any other bills paid monthly (e.g., phone bill). Knowing where all of your money is going will help create a post-divorce budget - and make it easier to cut costs.
- Once you know exactly where all of your money is going, look for ways to reduce some expenses without sacrificing too much quality in your lifestyle (e.g., cooking more meals at home).
- Look for additional streams of income. Maybe on weekends or days off, such as taking on an extra job or getting rid of cable TV, will considerably reduce your expenses.
- If possible, check the benefits of filing jointly or separately. This might help save money until your divorce is finalized.
- As soon as it's practical and safe to do so, begin paying only for what you need - don't pay extra on credit cards or loans just because that money isn't being used right now. You'll want this money to help support yourself once your divorce is finalized.
- If you have a savings account, start moving the money into an interest-bearing checking or brokerage account - this will make it easier for you to access cash when necessary without incurring monthly fees that can eat away at what's leftover.
- Once your divorce is finalized, you'll have to split what's in the savings account with your spouse. While this may not seem fair, it can help you financially if there are any debts left over after dividing assets. And avoid having a massive financial burden hanging over their head.
- A good rule of thumb is to keep at least three months' worth of living expenses in the bank, but remember that you'll also need money for other things (e.g., legal fees).
- If possible, and again if it's safe to do so, lower your withholding on your taxes from your paycheck - this will increase what you take home each month with every paycheck and give you more money to work with.
If you are looking for more ways to manage your finances, join the Divorced, Not Broke Masterclass. In this masterclass, you will have all the tools you need to take charge of your money, manage your finances with ease and achieve financial independence.
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