The financial impact of a divorce can be as devastating as the emotional one.
In my role as a divorce attorney, here are some of the things I advise my clients to do as soon as possible after they have decided to end their marriages:
Make an accounting of your assets. Get an inventory of all of your assets including both those you own yourself and those owned with your spouse. Assets can include: pensions, 401(k) s, insurance policies, real estate holdings, stocks, bonds and savings.
Also, check your credit report. It’s not unusual for people who have lost interest in their marriage to start opening accounts – in their names (individually) or in the name of their spouses. Make sure that no accounts have been opened in your name without your consent. Sign up with a credit protection agency, like Debix or LifeLock that monitors these activities.
Contact all financial advisors. Once you make the decision to end the marriage, get in touch with anyone who handles your money. Don’t wait for the divorce to come through to contact banks, brokers and financial advisers. Let them know the situation. Send them something in writing that says no one can remove funds from your accounts without written approval from both parties. That protects you from the other party clearing out the assets before things are finalized. The laws in many states restrict such withdrawals once a divorce is started
Get an understanding of the alimony situation you may face. If you’re the primary breadwinner in your household, whether you are a man or a woman, you need to consider the fact that you may have to pay alimony. And if you have children, there will probably be child support. Get familiar with the divorce laws in your state. They vary across the country in how they treat each of these situations.
Make a budget. Whether or not you had a budget as a couple, you’ll need one as you contemplate single life. No matter what, a divorce will have an impact on your finances. Start to create your budget by adding in your monthly recurring expenses, like your mortgage or rent, car payments, childcare, cable bills, even gym memberships. Then figure in a monthly allocation that will go towards annual costs like car and home insurance and taxes. Knowing about these expenses will help you negotiate alimony and child support and help you decide on whether you’ll need to change your lifestyle after the marriage ends.
Start setting aside cash. No matter whether your divorce is contentious or cooperative, there will be expenses involved with it. And there’s no question that the aftermath will have an impact on your cash flow situation. Setting aside some funds for a financial cushion will help ease the disruptive financial nature of the break-up of a marriage. Check on whether your state’s law restricts your ability to transfer funds.
Recovering from the end of a marriage is tough – emotionally and financially. Taking these steps as soon as you decide the marriage is over will help you manage the financial impact and make your life easier.