No one wants to plan for the worst case scenario and when you’re married you certainly don’t want to be worried about anything as terrible as divorce. After all, you’re in love and you want your marriage to last.
That makes sense, but approximately half of all marriages end in divorce. When people consider the consequences of divorce, they often think about the effects on the children and the loss of a partner, with the impact on their finances a secondary concern—or not something they think about at all. The truth is, though, a divorce can have a drastic impact on your economic situation.
In addition to the legal fees associated with a divorce, you have to think about splitting your assets, how your finances will look after you no longer have a spouse, managing your cash flow, whether you need or will pay child support or spousal support, and how to get your finances back on track.
Prepare for divorce
Once you know the divorce is happening and there’s no way around it, begin tracking your household’s income and expenses. This will help determine your budget after the divorce and will assist the courts in determining how any assets or liabilities should be split, and whether spousal support or child support will be awarded.
Things to include in your tracking are household bills, clothing, home maintenance, transportation costs, child care and food. If you have past banking and credit card statements, use those to estimate your household income and expenses from the past. Make sure you also include one-time expenses such as vacations or large household purchases.
Get as much documentation as you can to support your claims. Include banking statements, investment statements, loan documentation, credit card statements, pay stubs, income tax returns, and a list of any assets and debts either that were brought into the marriage or that accrued since you were married. That will help the judge as they determine how to split the assets and liabilities from the marriage.
Get advice from a professional
Going through a divorce is already emotional enough. Your lawyer will advise you on the legal dealings, but there are rules regarding your finances as well. A financial expert will help you navigate the monetary and investment aspects of your divorce and advise you on what you can and cannot do until your assets are split and the divorce is finalized.
You may be tempted to make big financial decisions, but those aren’t always advisable and could affect any awards the judge gives regarding support for or from your spouse. A financial expert will also help you plan your finances for after your divorce, when you may need to re-examine your budget, cash flow or your investments.
If you were not involved in planning or managing finances when you were married, speaking to a professional is even more important as you will have to make many decisions about your financial future and may need assistance understanding how to manage your money effectively.
Final thoughts
Your friends, family and colleagues will offer well-intentioned but often inaccurate financial advice during this time. They’re just trying to help but they aren’t in your exact situation and don’t have a full understanding of the legalities surrounding your circumstances. Resist the temptation to listen to them and instead speak with a professional financial planner about what you’re going through.
Divorce is stressful enough without having to navigate the financial aspects of ending a marriage.
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