Sometimes a marriage can’t be saved. No amount of marriage counseling and best efforts can fix them. Divorce is a difficult process. It is emotionally and financially taxing. That’s why you should prepare your finances before the divorce. But just how do you prepare yourself financially for divorce?
Every divorce is unique, so while the tips below will help you, we still recommend seeking specific advice from a Certified Divorce Financial Analyst®.
Beware of Friend(ly) Advice
It is not a good idea to listen to advice from your friend about her sister’s divorce, or from that blog, you found online about divorce. Divorce laws vary by state so it’s important to be cautious of any advice you receive. Do not move money, change accounts, or make any other financial moves without speaking to an attorney from your state.
When it becomes clear that a divorce is needed, you should start tracking your income and expenses. This will help you create a post-divorce budget and will also be a great help when the judge decides how to split assets and debts, and reward spousal and child support.
It is ideal if you have already been tracking expenses but if not, start now. Include household bills, food, clothing, home maintenance, transportation, childcare, entertainment, and anything else you spend money on. You can use past bank statements and credit card statements to estimate spending from past years.
You also need to account for things like holiday trips, vacations, and one-time expenses like replacing the garage door. Think about how your circumstances will change. If you are paying for childcare now, that will transition to after-school activities and eventually college tuition. Take these things into account when you create your post-divorce budget.
Gather Necessary Documents
Gathering financial documents will help your case immensely. However, it can be time-consuming and tedious so start as soon as you can. If you share accounts with your spouse, remember that the financial institution or advisor has no obligation to keep your requests confidential. You should start with these documents:
- Income tax returns for the past three years
- Checking and savings account statements for the past year
- List of assets and debts brought into the marriage and accumulated since marriage
- Retirement account statements
- Recent pay stubs
- Investment account statements for the past year
- Credit card statements for the past year
- Ledgers for any loans, including mortgage, auto, and personal loans for the past year
The Institute for Divorce Financial Analysts offers a checklist of financial records you’ll want to use to help you prepare financially for divorce.
Be Prepared for Resistance
Amicable divorces usually involve a free exchange of information, but adversarial situations are different. The spouse may not release documents unless they are legally forced to. This is especially true if one spouse controlled the household’s finances.
Even if you think the divorce is cordial, expect rough patches. If you have the paperwork gathered beforehand, it makes the likelihood of confrontation lower.
Avoid Big Financial Decisions
The divorce proceedings will determine your major financial changes. While it may be tempting to get a head start on things like adjusting life insurance beneficiaries, it is best to wait. You should avoid any big financial decisions during your divorce proceedings. If you make changes prior to the divorce, it could cause the judge to award your spouse. Furthermore, it could be grounds for criminal contempt charges.
Spend Conservatively and Save
Separating financial accounts can be tricky. Some states treat all assets, income, and debts as if they’re part of a single pot. If you empty, or even just dip into that pot more than usual in the weeks and months before divorce, it could be detrimental to your case.
Instead, you should continue to use your accounts as usual. If you don’t have money set aside for hiring an attorney, speak to your spouse and try to agree on an amount that you each can spend. If your relationship is not amicable, speak to your attorney about a legal separation. This would dictate how you and your spouse can use the money until the divorce is finalized.
Ask for Help
If there was ever a time to get help, it’s for a divorce. You should not do this alone. These decisions will impact your future and it’s best to have advice from experienced professionals. A Certified Divorce Financial Analyst® can offer advice on the divorce and how it will affect your current and future financial health.
Schedule a Consult With One of Our Certified Divorce Financial Analysts®
If you are facing a divorce, you should consider speaking with an experienced professional. It is never too soon to start preparing yourself financially for divorce and planning how it will affect your finances. The financial advisors here at Argent Bridge have the knowledge and experience necessary to help you. Contact us today to get started!