A divorce has the potential to significantly reshape your finances. Whether you are the breadwinner in your relationship, make less than your spouse or are on equal financial footing, it is in your interest to prepare for the impact of this significant life event on your hard-earned money. Take the appropriate steps to financially prepare yourself for divorce and you’ll find your transition away from marriage is that much more seamless. Without further ado, let’s take a look at how to embrace the challenge of preparing your finances for divorce.
Organize all Relevant Assets and Paperwork
If you are like most people, you don’t keep close tabs on every single financial account. Add in the fact that some accounts are jointly held between spouses and there is even more reason to obtain financial clarity in the context of your personal assets. Write down or organize your financial accounts in a spreadsheet. Add up your assets, create files for each and you will have a better idea of your net worth as you approach the divorce.
Your financial accounts only tell part of the story of your financial picture. Obtain your previous five years worth of tax returns so you can reveal the entire picture of your household’s income generation. Don’t forget to check your credit report. If there is even a single account listed on the credit report that is not yours or incorrect in any other way, contest the information so you don’t carry it on your record into the divorce proceedings.
Revisit Your Budget and Alter It Accordingly
Take a moment to consider whether your current budget will make ends meet after divorcing. If you are reliant on your current spouse for financial support, there is no guarantee you will receive alimony payments. Furthermore, if you do not have a child who is a minor, you won’t have any chance of receiving child support payments. Reevaluate your budget to ensure it makes sense moving forward, reassess how you spend your money and alter your discretionary spending, saving and investing accordingly.
Don’t Make any Significant Financial Decisions Until Divorced
The months, weeks and days leading up to your divorce are not the optimal time to make major financial decisions. If you have been considering buying a car, boat or other costly item, hold off on that purchase until your financial picture is that much clearer after the divorce. The last thing you need is a sizable debt after losing half or more of your assets in a divorce. Keep your financial activity moving along as usual throughout the divorce and wait until the legal process culminates before making any significant financial decisions.
Remain Civil Amid Resistance From Your Spouse
Your spouse and his or her attorney are unlikely to view your request for what you deem to be a fair division of assets and income in a favorable light. The same is true of yourself and your attorney when it comes to reviewing the counteroffer.
The end result of your divorce that is your matrimonial settlement agreement will be fair if you and your attorney develop a legal strategy that is reasonable considering the unique financial facts of your marriage. Remain civil while your financial picture is hammered out, cooperate with opposing counsel throughout the process and you will have done your part to move the divorce along in as drama-free a manner as possible.
Don’t be Afraid to ask for Help From the Professionals
A divorce is a period of time in which you feel lonely and potentially hopeless. However, you are not alone in your struggle. Even if you don’t have any kids or other relatives available to comfort you, help is available in the form of an attorney and also a financial advisor. These professionals will guide you through the legal process of divorce and also help you develop certainty in the context of your financial picture as the divorce takes shape. Be willing to ask for financial and legal guidance throughout the divorce, pose concerns and you’ll have done your part to reduce the toll taken on your personal financial picture as well as your emotions.
Track and Anticipate Expenses Starting Today
Now that you will be shifting away from a two-income household to a single income household, the time has come to closely analyze your expenses. Save your receipts after each purchase, analyze them when preparing your budget and do everything possible to keep your spending within reason. Monitor your spending on everything from entertainment to transportation, food, clothing, bills and beyond.
Aside from analyzing receipts, it will also help to study your credit card and bank statements for additional information and insights into potential opportunities to reduce spending. Continue to track and anticipate upcoming expenses as the divorce process occurs and you’ll develop the habit of closely watching your spending dollars while keeping track of the items you spend for. Maintain this habit and you’ll find shifting to a household with one income isn’t nearly as difficult as originally anticipated.
Be Conservative With Your Money
Above all, the most important thing you can do as you prepare for your divorce to unfold in a court of law is to be conservative with the money you have worked so hard to save and invest. Now is not the time to rush to the bank to withdraw funds from bank accounts that are mutually held between yourself and your spouse. Remain honest and forthright, take the civil approach by discussing finances with your spouse, especially in terms of jointly held accounts, and move forward like mature and responsible adults.
Keep in mind, if you were to alter your spending, especially from jointly held accounts, and the hike in spending is noted in court, it might be detrimental to your divorce and the subsequent division of assets. Do everything in your power to portray yourself as financially solvent, sound of mind and civil and you’ll maximize your chances of a matrimonial settlement agreement that is fair in the context of finances.