Going through a divorce is a distressing process and has a huge impact on the finances of the people involved. While the fact remains that no two divorce proceedings are alike, there are few things one should keep in mind to ensure their financial security post-divorce. A mutual consent divorce is judicious-both emotionally and financially.
Since each divorce is unique, specific guidelines or advice mostly come from your lawyer, who is familiar with your case. Finding your footing as a newly single person could seem daunting; especially financially. But you will survive. All you need to do is handle your settlement with a clear head. It is prudent to have an accurate accounting of your finances. This will help you gauge what your life ahead would look like and whether you can afford it.
Here are few ways to ensure your financial security while going through the divorce proceedings.
Gather your support system
Now this has no bearing on your financial decisions. Divorce can make you make you feel companionless and bitter. Isolating yourself to cope with grief could be quite detrimental. Hence, it is imperative that you take care of yourself. It can be quite difficult to go through this alone. This is when you need your close confidants with you who have your best interests in mind. And if at all you are dealing with an ordeal like domestic abuse or any other form of mental trauma that has been triggered by the divorce, seek professional help.
Next, you need a good divorce lawyer who will help you in understanding the legalities of the situation and help you make a sound and wise decision. However, every session with the lawyer would cost you. So, it would be wise beforehand to make a list of things you would want to discuss with your lawyer.
Track your current expenses and foresee your future expenses
The moment you realize that a divorce is fated immediately make a list of all your expenses- even the ones you consider insignificant. Living alone could cost a lot more and hence it is key to know what your monthly expenses will look like. A new single life would mean looking for a new house/accommodation, a new vehicle, probably a new health insurance, other rentals, groceries etc. You should consult a financial advisor before you file for divorce, as they could help you understand the financial complexities of a divorce, which could greatly ensure your financial security.
An important tip: Make sure that you familiarize yourself with the divorce laws of your state and the timeline required for the process so that you know your options and are not in for a shock if the case drags longer than you anticipated
Get your documents in order and take stock of your assets
Gathering your documents could be one of the most mind-numbing and time-consuming processes. So, the sooner you start the better. In fact, these documents give a clear picture of your financial health and makes it easy to ensure your financial security. Some of the important documents would be: statements of the checking and savings account (previous year), all the investment account statements (past year), credit card statements (past year), ledgers of your mortgage, personal loans and auto loans (previous year), Income Tax returns of the past three years and lastly the complete list of assets or debts brought into the marriage and also those racked up since marriage. You also will need the statements of income that you and your spouse receive.
To ensure your financial security, it is important that you also take stock of your assets. You need to check how much liquid cash you have on hand, in your savings, equities and other investments if any.
All these will help you identify whose name is attached to what. For instance: who is the title owner of the car/vehicle? Whose name is listed on the loans? Whether you have named your spouse as the beneficiary in your will or insurance policy? Etc.
Be prepared for resistance and be composed if you might need to sacrifice
Even if you are going through an amicable divorce, there are bound to be some rough patches, especially when the household finances are controlled by one spouse. This resistance can be avoided if you have your paperwork in place. If this situation turns contentious, your lawyer might suggest that you go for court ordered options.
It is possible that you won’t come out of this situation with all that you want. Hence, you need to see what is more important to you, try to be fair and accept that your lifestyle is most likely to change as you are going to start over afresh.
Prioritize your wants and needs
To ensure your financial security, it is crucial that you clearly know what you need instead of what you want. Do not blindly agree to the settlement the lawyers offer. Sometimes the numbers that might appear big on the face of it, might not really suffice in the long term. You need to look at your life with a wide angle when it comes to finances; especially when it comes to maintaining your standard of living and child support.
Divide the assets fairly but be wise at the same time
Dividing the assets that you have accumulated post marriage is not as easy as it might seem. In order to ensure your financial security, you need to figure out what you need, to move forward in life. For instance, some assets are more liquid than others. Opting for liquid assets would be a wise move rather than wanting to keep the house which is an immovable asset; especially if there is a mortgage on the house. If you see that you do not have enough cash flow to maintain and keep the house, it is wise to let it go.
It is also important to know the tax implications that come along with assets. Both the parties need to know what is going on. If one of the spouses falls under the “higher tax bracket, it will be wise to opt for assets which have less tax implication. And the spouse that falls under the “lower tax bracket” could take possession of assets with high tax implications.
Settle all debts
Before setting foot into a new and more expensive living style post-divorce, make sure that you settle all shared debts with your spouse. According to the lender, joint debts are both party’s commitment. So even if your settlement states that only one spouse is responsible to pay off the debt, and if that spouse fails to do so, the default is bound to show up on the credit history of the
other spouse. In order to avoid this mess, try settling and clearing all debts before the divorce is finalized.
And finally make sure that you have back up plans to ensure your financial security. Make sure that your divorce settlement has a failsafe for eventualities. For instance, if your spouse is unable to provide child support anymore or is disabled or has lost their job, you can insure yourself under those circumstances by ensuring that the divorce settlement includes a claim on either the life insurance or maybe an estate.