Financial Advice for Handling Divorce: 5 Tips and Coping with Separation
Along with the emotional strain of witnessing an end to one of the pivotal relationships in your life, divorce comes with one more troublesome aspect: Dividing the assets and planning your financial future after the final break-off.
Even though this challenging time can leave a mark on both parties involved, treating the financial angle of the separation seriously is paramount. Knowing your obligations and rights and handling them responsibly will ease the transition into a new stage of life and protect your assets for the future.
Making a comprehensive checklist of everything that must be done is a good place to start. Here are five crucial pieces of advice that will help you manage your finances and stay on top of the situation.
Organize Your Paperwork and Update All Relevant Accounts
One of the most important things to do during the separation involves taking the time you need to handle and classify all the relevant documents. Untangle every financial knot, no matter how much time it might end up consuming.
Make sure you and your soon-to-be-former spouse continue to pay your utility bills for as long as you share the same living space. After coming to an agreement on who gets to stay and who leaves, make sure to update all the relevant billing information so statements and invoices reach the right person.
Close all joint bank accounts and cancel joint credit cards. If you haven’t had one before, open a new bank account in your own name. If you had your own account, but your spouse has your PINs and other security information, make sure to change them. Update your insurance policies and lease agreements and, if it applies, also update your will.
Divide the Assets and Plan All Your Mortgages
In order to plan the distribution of all the assets between you and your spouse, make sure to put them all on paper first (or, of course, list them electronically). If the communication between the parties is good, you might not need any additional help. However, if you and your spouse can’t come to an agreement that works for both parties, consider hiring a lawyer or contact a family dispute resolution provider (e.g. a mediator).
Mortgages hold an especially important position since missing payments can make the situation at hand much more complex, posing a significant risk for your financial future. Notify your mortgage lender (and all additional lenders) of your separation and ask your bank(s) to request both signatures in case of any withdrawals.
In case the legal owner of your family home is your spouse and your name appears in no official documents, make sure to consult a lawyer before doing anything on your own.
Manage Your Personal Income and Expenses
Separating your finances from your spouse’s is never an easy task. Once again, you must put everything down on paper or in electronic format in order to assess your situation.
Create a personal budget for your post-divorce life by writing down your income and likely spending to get a clear overview of your finances. Only then can you begin to plan how to distribute your income. If you’re thinking about requesting alimony and/or child support from your former spouse, make sure to notify them of it first. It would be best if you can reach a satisfactory agreement on your own.
However, if you believe you should get financial support from your spouse and you don’t see eye to eye, it’s best to contact a legal professional to help you navigate through this situation.
Editors Note: According to the US Census Bureau, only 40% of child support due each year is ever collected. Consequently, be careful betting your future financial stability on child support, court-ordered or not.
If Possible, Opt for Mediation Rather than Divorcing in Court
Some couples manage to go through divorce calmly, and gently, all the while respecting each other’s needs and points of view. If your separation process doesn’t resemble anything like this, don’t blame it on yourself: This stressful time presents a great emotional challenge for both parties involved.
If you can’t seem to agree on most things, you and your spouse are probably thinking about settling the divorce in court. However, from a financial point of view, this isn’t the best decision you can make.
If you are looking for some professional help that will cost you less in the long run, consider professional mediation or arbitration out of court.
Steps to Take After the Divorce
After finalizing your divorce, make sure to address individual loans and keep track of them meticulously. This includes any student loan debts you may have, as well as personal life insurance.
If you and your former spouse had joint life insurance, you may agree to cancel it in order to withdraw and split the funds, then open new policies individually. In case you had life insurance on your name, but you need a financial injection after the divorce, you might consider cashing it out, but only if necessary and you’re planning to use the money reasonably.
Although going through separation always leaves a mark, don’t let this stop you from handling your finances carefully and timely. After your divorce is finalized, you’ll be able to move on without any new debts or other financial obligations that could burden you in the long run.
If you have creditors that refuse to close or split joint accounts, be sure to monitor payments, even if the court has ordered your ex to make the monthly payment. We also recommend you freeze your credit report with each of the major credit bureaus. Be aware that if your ex stops making a payment on an account that has your name on it, the creditor can come after you, regardless of what the divorce decree specifies.
