Much of financial planning involves preparing for the unpleasant and unexpected. Almost half of United States couples go through a divorce at some point in their lives - and it’s a difficult process both financially and emotionally. Although money may be one of the last things on your mind right now, there are a few steps to take that can help you to line up your finances when divorce is imminent, and after you go through proceedings.
When you start to consider divorce, start tracking your expenses immediately. This helps you to create a budget for after your divorce is finalized, and it will be invaluable to your attorney and the judge if you need spousal or child support. Track ongoing expenses such as utilities, seasonal expenses like school sports enrollment for your kids, and one-time purchases like family vacations or repairing your car. You can also reach back into your bank records to find your expenses over the past 12-24 months to give you a more comprehensive idea of your current cost of living.
Don’t go into a divorce without knowing what you own, what you owe, and why. When your attorney and the judge helps to divide your assets and debts, you don’t want to run across any surprises. Note any joint and individual accounts you have, and start to pull old financial records. This includes:
You want a full inventory of your assets and debts so that you know exactly where you stand. After your divorce is finalized, you’ll need to become comfortable managing these accounts and bills on your own if you aren’t already. Familiarizing yourself with your financial situation is an excellent first step to take.
Divorce can be expensive. Even if your separation from your partner is amicable, attorney and mediator costs can become overwhelming very quickly. In preparation for the upcoming costs, and to help prepare you to live off of one income in the near future, it can help to rein in your spending and start contributing to an accessible, cash emergency fund. Try to save several month’s worth of expenses as well as any legal fees you think you may accrue. If this isn’t possible, don’t be afraid to start small. Anything to offset the cost of your attorney or mediator can be helpful.
Divorce is not a time to try and handle your finances by yourself. Having a supportive financial advisor in your corner can help you to get organized now while creating a plan for the future. While your financial goals right now may be focused on the short term, your advisor can help you to think beyond the year or two after your divorce and create an individual plan for retirement savings, paying for your children’s college, and helping you to live the life you want.
Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.
"Finance Made Simple" blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.