Going through the divorce process can seem overwhelming. Emotions run high, going from sadness to anger. However, it's important to stay as levelheaded as possible, because you'll have to make important decisions, including those effecting your post-divorced life. Many of these decisions will include your finances. Here are a few suggestions to help you achieve a secure post-divorce settlement.
- Stay calm at all times. As you work through many financial decisions, keep in mind that your goal is your future financial security. Don't get caught up in a “I won/you lose” power battle. This can lead you into taking on debts you can't pay or losing assets you truly wanted. Stay calm and keep the end game in mind.
- Become familiar with your financial situation. During a marriage, you and your spouse may have fallen into a comfortable division of responsibilities. If you haven't been responsible for the finances, you'll need to acquaint yourself with paying monthly bills, as well as yearly taxes. Do you know your credit score? What about your credit card debt, mortgage debt, car payments and insurance, and bank loans? Before you file for divorce, spend time familiarizing yourself with pay stubs, credit card statements, bank statements, and tax documents. Make copies of everything you find, no matter how small. Knowing your financial situation is vital, and having documents for your attorney will help them prepare a strong case.
- Create a post-divorce budget. You will only have one income now, so create a budget that reflects that. Plan for monthly expenses, such as rent, utilities, car payment and insurance, and food. If you have children, budget separately for their needs. This will be important when it comes to childcare and custody. Remember, you aren't trying to win a power struggle, you're trying to secure a comfortable financial future after the divorce is done.
- Don't overlook debt. Many couples only think about the division of assets during the divorce process. They don't think about the joint debts they carry on credit cards and loans. Providing your attorney with copies of your family's financial documents in advance can help them clearly outline joint debts and make sure you aren't held responsible for your ex's debts.
- Consult a tax professional. Every financial decision made during divorce proceedings carries the possibility of potential tax consequences Accepting a lump sum settlement without consulting a professional, for example, can leave you with unexpected liabilities. A tax professional can help you make a plan that will minimize your taxes, especially when it comes to alimony and pension plans.
- Give careful thought to accepting immediate settlements in order to finalize the divorce quickly. Short term gains do not always work in your favor. Being awarded the family home may seem like a win, however, in the long run, you'll have to pay the mortgage and taxes on the home, as well as all maintenance. Before, you had a second income and a second pair of hands to do this. If you don't have an income large enough to do these things on your own while still having the ability to pay monthly bills as well as any unexpected financial problems, your home will become a financial burden. It's best to think about what your financial situation will be like after the divorce and think carefully before agreeing to each proposal.
- Consider cost/benefit analysis before each decision. Work with an attorney and decide the possible outcomes of going to court. Are there issues that aren't worth going to court for? Is the toll worth the emotional strain it would put on your family? Think about working with a Certified Divorce Financial analyst to help you make this decision.
- Finally, keep in mind the things that must be done on your own during the divorce process. Attorney and court fees will come due. If you were covered under your ex's employer-sponsored insurance plan, you'll need to find a plan you can afford for the process is completed so there are no gaps in your coverage. Update your estate plans. Divorce is clearly a life changing event that requires reevaluating your estate planning needs.
Remember, just like each marriage, each divorce will be different, and staying calm and consulting professionals will be key in navigating divorce. Hopefully, these suggestions will help you achieve financial security and a smooth transition into your new life.