Divorce is often more crippling, both emotionally and financially than people realize at the onset. In fact, it may take years to see the full impact to you and your family and your estate. Because it is such a delicate time, often people “die on their sword” fighting over the wrong things they are attached to, and this can lead to making poor decisions. These decisions will likely impact your finances for years to come. If you are young you tend to think, “I can make up these losses” and sometimes that is true, however more often than not, it takes years to recover financially. So planning well in advance is imperative.
Fortunately, many of the things that need to be done after a divorce require less planning because the path was carved for you during divorce. So some later choices are easier to make.
Follow these strategies to get your finances in order during or after divorce:
1. Open your own bank account and close any joint accounts. If you’re getting divorced, you don’t want to be stuck with any financial liabilities your soon-to-be ex creates. This doesn’t just include bank accounts. Any credit cards are also potential nightmares. Contact your bank and credit card companies and explain the situation.
You might find it easier to open new accounts in just your name before closing joint accounts. This helps ensure that you’ll have access to money throughout the divorce process.
2. Consider your housing situation. This can be greatly complicated by the presence of children and other dependents in your household. When children are part of the picture, it’s often best to consult with an attorney to examine your options and get a real handle on the current real estate market.
3. Be aware of all your assets. Do you know the full extent of your financial holdings during your marriage? In many cases, it is typical that one spouse handles the financial matters, and the other is happy to stay out of it. Now is the time to dig in and develop an accurate picture of what you have. You might be surprised by what you discover.
As part of the divorce, you’ll have to collectively decide how to handle the assets. Do you split them? Sell them and split the proceeds? Or hire a lawyer and battle it out?
4. Take a look at all your insurance needs. You might need to get on your own medical insurance plan. What items do you still own that need to be insured? Your insurance costs might be much less now. There may be a reason to obtain new policies to cover your post-divorce obligations or to ensure that your new single estate is covered.
Your situation has changed, so your insurance needs have likely changed as well.
5. Create a new budget. Your income and expenses have changed, sometimes dramatically, so it only makes sense that your budget will change, too. If you’ve gone from a two-income household to a single income, it is important to be as accurate as possible about your income and your outflow. Create a budget that makes sense for your new circumstances.
6. Change beneficiaries on your life insurance and retirement accounts. There’s a good chance that your beneficiary was your spouse. Often spouses will leave the other spouse as a beneficiary up to a certain amount to cover any obligations or by agreement of both parties. However, as life changes, you will likely want to add or change to new beneficiaries. For most accounts, this is easily accomplished by filling out a simple form. This step is often overlooked and you should check on the proper process with your insurance agents and/or investment brokers.
Ensure that, in the event of your death, your assets go to those whom you want to have them. This is often delayed after divorce because of the difficulty of the divorce itself, and often leads to open probate matters that could have been avoided had the divorced person attended to their estate planning soon after the divorce.
7. Get a copy of your credit report. It’s important to know where you stand financially. This is recommended at the beginning of your case as well as after divorce. It’s just as important to be aware of all of your accounts. Your spouse may have opened a joint account or credit card without your knowledge. The better your credit, the easier it is to move through the world.
Though divorce is known to be a difficult time, it can be especially difficult if financial matters are not handled intelligently. Focusing your attention on housing, debt, income, and assets will make the transition easier.
These tips highlight the basics. In many instances, an attorney will be required. But understanding the basic issues will make it easier to make wise decisions. Apply these strategies to your circumstances and get the professional guidance you require.
We can help you navigate the financial end of divorce by scheduling a no-obligation, no-cost initial consultation and case evaluation with McMurdie Law and Mediation. Call today: 480-777-5500.