Divorce is traumatic — emotionally, physically and financially. I know — I’ve been there. There’s a lot to worry about, especially if you have children, which is why you need to take control where you can. The best place to start is with your finances, which can easily become a huge mess if you’re not careful.
Let’s face it — going through a divorce is going to cost you, both in terms of the actual process and in reduced income for both of you. In fact according to Forbes, men will realize about a 25% reduction in income and women about 40%. That’s a big adjustment, so the more you prepare ahead of time, the better off you’ll be. Be proactive and talk to a financial advisor before talking to a lawyer. There are even Certified Divorce Financial Analysts who specialize in this sort of work.
The worst thing you can do is remain blissfully ignorant. In this case, knowledge is power and the more you understand and plan, the better off you’ll be.
Here are 10 financial tips to help you through this very difficult time:
1. Gather all your financial records — bank accounts, mortgage statements, credit card bills, recent tax returns, wills, trusts — and make copies of them to leave with a trusted family member or in a lock box. You may have to do some searching, but the more information you have, the better.
2. Pull a free copy of your credit report so you can keep close tabs on what money is going out of your joint accounts.
3. Set aside some money — both for a lawyer (shoot for about $2,000) and in a new account (that’s in your name only) at a different credit union or bank. The farther out you plan, the easier it will be to build up your savings.
4. Open a new credit card, in your name only, so you can start establishing a credit history in your own name.
5. Draft a new will and change the beneficiary and who will be allowed to make medical decisions for you should you get sick or die before your divorce is final.
6. Look closely at your debt because in many states (not Massachusetts!) you’re responsible for half the total, even if it isn’t held jointly. You’re not off the hook completely in MA — you are still responsible for half of any credit card debt that’s in both your names.
7. Take pictures of valuable goods including artwork, china, silver, jewelry, etc. to make sure none of it goes missing.
8. Remember that half of everything you acquired during your marriage is yours. Use this to negotiate for things you really want. Start thinking about it ahead of time so you’ll be ready to fight for what you want.
9. Research insurance options, especially if you’ve been covered by your spouse’s company’s insurance. You’ll have to find an alternative carrier and pay for it, which may be more expensive than your current plan.
10. Talk to a tax advisor about what single-hood will mean for your taxes. Who will claim any children you may have as dependents? If you’ll be paying alimony, you can deduct it, but if you’ll be receiving it, it needs to be counted as income.
BONUS TIP: Make sure your mortgage still gets paid! Even if you’re no longer living there, you may still be responsible for it. Not paying it can really hurt your credit history.