The emotional toll of divorce is tough enough without worrying about the impact it can have on your finances. It’s important, however, to be aware of how splitting up will affect your finances – short-term and long-term. Here are some specific steps to take early on to protect both your money and your credit rating:
Close Joint Accounts
Joint accounts with your spouse – from mortgages to credit cards — are both your responsibility, even after a divorce, so be sure to close them as soon as possible. If there are children involved, you may want to keep one joint credit or checking account open for shared expenses, but monitor it closely. It’s not unheard of for an embittered spouse to move money from a joint account to an individual account – denying the other spouse legitimate access — or to run-up major credit card bills that the other spouse will be responsible to pay.
Monitor Your Credit Report
As a member of Hanscom FCU, you can access your credit report at no cost. Set up your free review here. You’re also entitled to one free report from each of the three major credit bureaus each year, and you’ll want to take advantage of the opportunity these offer to guard against potential fraud. Be on the lookout for new accounts an estranged or ex-spouse may open in your name.
Establish Your Own Credit
If you don’t already have accounts in your own name, it’s important to begin establishing a solid credit rating on your own. Open one or more credit card accounts, then be sure to use your cards and pay off your balances each month.
Decide Whether You Want the House
Many people have strong emotional ties to a jointly-owned family home. But a home that was purchased with two incomes may be unaffordable when you’re on your own, so take a hard look at your post-divorce income and financial status before deciding how to divide joint assets.
Revise Estate Planning Documents
Your spouse is probably named as beneficiary in your will, and for your life insurance and retirement accounts, so you’ll want to update those and other documents right away to reflect your new situation. Don’t forget to also revise your living will or advance health directive, and change any powers of attorney that designate your spouse as a decision-maker for you.
Create a Budget
Even if one spouse is required to pay child support, it’s likely that both of you will be living on less money after the divorce. Avoid getting yourself into financial trouble later on by creating a budget that’s based on a realistic estimate of your post-divorce income. Remember, as a single person you’ll now be fully responsible for your own retirement savings and necessary insurance, so be sure to include those in your financial planning. If you have children, you may also need to determine how long-term goals like college planning will be addressed.
Track Child Support Expenses
If you have children, be sure to create a system – a spreadsheet’s a good idea – to track both child support payments and costs. This type of documentation can go a long way toward minimizing financial disagreements with your ex.
For additional help in organizing your finances before, during and after a divorce, take advantage of the free financial counselors available through our financial partner BALANCE. Call 888-456-2227 or set up a chat on the BALANCE website.