8 Tips for Financially Preparing For Divorce
On television, it all seems to happen quickly - there's no time for preparing for divorce. Then, one partner walks in the door and announces, "I want a divorce!" The other couple has a big fight, and one of them says, "That's it! I'm filing for divorce!"
Divorce is more of a slow burn in many "real life" instances. Sure there are those times when spouses angrily separate and one or the other moves out. However, in many cases, you see it coming, sometimes years in advance.
Because of this, you want to take the time to be financially prepared – especially if you're the one initiating the divorce from your spouse.
Every divorce is unique, but certain documents and financial paperwork are required when you're filing, whether you're using a divorce mediator or working with attorneys. Therefore, it's wise to get your financial house in order and gather the required documentation before reaching out to a divorce mediator or lawyer.
Tip for preparing for divorce:
Every case is different; however, here are some general tips to help you prepare financially for your divorce.
Know where the family financial records are and gather copies of them. Prepare a financial binder or create an electronic file with all of your documents. You will want to have copies of the following:
- checking and savings account statements,
- retirement and investment account statements,
- documentation of outstanding debts for the mortgage, credit card bills, and others,
- pay stubs,
- a list of the assets and liabilities you brought into the marriage and those accumulated during the marriage, and
- copies of income tax returns.
Set some money aside
When you have a significant change in your life, there are always expenses associated. Whether it's getting married, having a baby, or going through a divorce. You can do things to keep the costs of the divorce itself down. However, even if you don't break the bank on legal bills, there are still going to be costs associated with any transitions you're going through. You may end up moving or needing to replace some furniture or just some money to live on for a while. This is a good time to make sure you have a liquid savings account in place.
Limit unnecessary spending
If you feel a divorce is on the horizon, refrain from making any long-term or significant financial decisions. Be ultra-conservative in your spending habits. Prepare now, for the time when you're single and are responsible for making your own way financially.
Know your expenses
Get clear on your expenses. If you're not regularly involved with the finances or you don't maintain a regular budget, start tracking your expenses. Many people underestimate their spending. We would urge you to grab a notebook and track your spending for a couple of weeks – write down everything you spend, from the newspaper you buy to the groceries you pick up on the way home from work.
When getting financially prepared for divorce, don't forget to factor in insurance payments (vehicle, home, and health), utilities, groceries, car maintenance bills, etc. You can do this in whatever way you feel comfortable. It could be a small notebook in your purse, or it could be using software such as mint.com to track your spending electronically.
Plan for future expenses
Once you have a good idea of your current expenses, try to determine what your future expenses will be once you're single. Consider what your living situation will be and the costs involved. Write it down and see if you currently have the income to cover those expenses.
Determine your income needs
If you are currently working, are you making enough to make ends meet on your own? If you are, that's great. Unfortunately, that's often not the case. If you're not able to cover your expenses yourself, what can you do to increase your income? It's time to start thinking. It may make sense to further your education to prepare yourself for a higher-paying job or to establish a side hustle. You may be eligible for spousal and/or child support, but eventually, you'll want to cover your expenses on your own. Come up with a plan for how you'll do this.
Establish/Improve your credit
If you do not currently have a good credit history, it's time to focus on improving that by consistently paying each bill on time and reducing your debt overall. If you don't have a credit history, it's essential to establish one. Get a credit card in your own name. Make small purchases each month and pay your account off in full. It will limit your credit utilization and show that you are consistent in making payments. A solid credit history is vital for applying for loans and applying for apartments.
Consult with a Certified Divorce Financial Analyst (CDFA)
You may be wondering about how to handle the financials in your actual divorce settlement. Having a financial professional on your team can reduce stress while helping you achieve the best financial outcome. When facing a divorce, a person's first instinct is often to get an attorney involved. While there's no substitute for sound legal advice, many of the decisions made in a divorce are financial. Having support from someone well-versed in divorce financial planning and analysis (such as a Certified Divorce Financial Analyst) can save you a lot of frustration and money on legal fees.
About Intentional Divorce Solutions
At Intentional Divorce Solutions, we're committed to guiding individuals through the complexities of divorce with an approach centered on empowered choices and respectful outcomes. Our team provides comprehensive support and expertise in several key areas:
- Divorce Financial Planning and Analysis: Providing in-depth financial insights and strategies for a secure future post-divorce.
- Divorce Mediation: Facilitating respectful and balanced negotiations to reach mutually beneficial resolutions.
- Divorce Coaching: Offering personalized support and guidance to help you navigate through emotional and practical challenges of divorce.
- Divorce Support Groups: Creating a space for sharing experiences and finding strength in community support.
Please Note: We focus on providing support and solutions in various aspects of divorce. However, we are not attorneys and do not offer legal advice.
Work With Us
If you are on the journey of divorce and seeking professional, empathetic support, we are here to assist you. Reach out to us to discover how our services can be adapted to your unique needs, empowering you to make informed decisions for respectful and positive outcomes.
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