If you are just starting to contemplate divorce or have already had the conversation with your spouse, the next step is to start to understand your finances – arguably before you begin interviewing attorneys.
It is helpful to think of divorce as three individual processes: the legal, the emotional, and the financial. For each of these “divorces”, different specialists may be beneficial, or you may not need help in all of these areas. This article focuses on preparing for the financial aspect of divorce and outlines some things you can do today to help set yourself up for a smoother divorce process.
Step One: Get organized
If you don’t manage the finances in your marriage, you may not know where to start when it comes to understanding your financial situation. Eventually will need to know what types of assets and debts you have, the associated account numbers, who is listed as the owner and beneficiary, and the value.
Here is an overview of the various items you should collect documents for:
Money: checking, savings, and investment accounts
Retirement Accounts: IRAs, Employer plans (401k), pensions
Property: Home, vehicles, land
Debt: Credit cards, loans, lines of credit, mortgages
Step Two: Protect your credit
You may be liable for your spouse’s credit card debt even if you are not the one doing the spending. Understand this and monitor your joint accounts. During divorce, the daily expenses still need to be paid and managed. Make sure you understand the recurring bills of your household and ensure that they continue to get paid on time – this is critical to protecting your credit score. If you plan to buy a new home or will need to refinance in order to stay in your home, your credit score will become very important very soon.
Step Three: Make a budget
Everyone hates this part, but understanding your spending and what it actually takes to pay for your lifestyle is enormously important. Your budget will not only come up in support discussions, but the earlier you can understand how your lifestyle may be impacted once you live off one income, the better. Divorce statistically decreases family income between 28%-42% – that’s a big change. In a state like California, spousal maintenance (if even awarded) is likely to be for less money and less time than you would expect.
If you would like to better understand your options and how to protect yourself financially during divorce, speak to a Certified Divorce Financial Analyst® today.