Whether your marriage has broken down due to financial differences or your money situation becomes a sticking point during the divorce proceedings, preparing financially for divorce will ensure you come out the other side fairly.
If you want to save money in your divorce, your divorce attorney will tell you that your organizational skills and preparedness will help save you money in the short and long term.
You’ll likely come across a lot of people offering financial advice in the lead up to and during your divorce. One of the key things to remember is that each of us has a unique situation, so you must do what’s right for you. If at any point you struggle to decide which pathway is best for you or you’re unsure of your legal obligations, seek the advice of a financial professional or an attorney.
An example is updating your will and life insurance. An attorney, for example, may advise you to refrain from changing these documents and the beneficiaries on them prior to divorce to avoid a judge awarding them to your spouse.
So if at any point as you prepare your finances for divorce that you have doubts, seek legal advice first before making changes.
1. Collate your asset and liability documents
Take stock of your assets and liabilities by going through all documents you have access to. These might include:
- Savings and credit card accounts
- Retirement funds
- Investment funds
- Loans, for things like your house, vehicles or personal loans
- Income statements
Check whose name is on which documents, so you understand what your personal debts and assets are.
For a full list of financial documents to collate, you could access the Institute For Divorce Financial Analysts checklist. As you collect each item, tick it off.
If you’re worried about what’s going to happen to you and your assets after a divorce, you are not alone. We use a family law software to look at taxability and project future growth for your family assets and inheritance. So know that you don’t have to go through the exhausting process alone.
2. Decide whether to open your own bank account
Whether you open your own bank account prior to the divorce proceedings comes down to your personal financial situation, whether you already have joint finances and your state laws. This is a case where an attorney or lawyer may be best to consult prior to taking the first step to avoid future headaches or financial losses.
For example, an attorney may advise that individual and joint accounts will be viewed as one figure to be divided between the two of you during proceedings. In this case, it defeats the purpose of setting up an individual account prior.
If you discover it’s possible in your situation to open your own bank account, then you may also want to seek legal advice on what can be taken from a joint account for your own purposes. Common sense will tell you that draining a joint bank account for yourself won’t fair well for you when divorce proceedings begin.
One reason you may feel you need to open your own accounts is because of your growing awareness of the costs associated with divorce, which can run into the thousands. Then you need to factor in the possibility of moving costs, opening new household accounts and possible purchase of furniture. These things are going to require you to have access to money.
An attorney or divorce coach can help you work through these types of financial goals.
Other reasons range from wanting to start feeling a sense of independence through to domestic violence and financial abuse, where fears of being frozen out of accounts would leave you without anything.
Do your homework and seek the right advice before proceeding so you gain the short term and long term financial benefits for yourself.
3. Create a private email account for communication
In the lead up to divorce, there may be reasons you don’t want your partner to know that you’ve started the preliminary divorce process. Sometimes it could be that you may feel your privacy is often not respected.
This is especially true if you happen to be in a relationship where your safety is also a factor. In this case, it’s wise to open a new email account that only you can access and that isn’t easily accessible by someone simply opening your device. An email account where you need to log in via a browser rather than an app is a good example of this.
This email address can be used for all types of communication you may need in the lead up to and during divorce, like conversations with your divorce coach or your attorney.
4. Develop a post-divorce budget
Have you thought about what your life will look like and what that will cost once the divorce is settled?
Before you can determine what you’ll need to live on post divorce, it’s important to start tracking the expenses you currently have as a household. This will provide a better snapshot of what you’ll need to live on once you’re managing your own money.
In some cases, you’ll find ways to save, because you’ll have greater control of what money gets spent on. However, on the flip side, you will be paying the same bills but on one income, rather than two.
Start tracking your budget by including things like food, household services (water, power, insurance), phone, transport and vehicle, clothing, school or child care, health insurance, and entertainment.
This task should be an important one when you’re preparing financially for divorce.
5. Learn how to manage money
For some, one person in the relationship was responsible for managing money. This means, if you weren’t that person, you may need to take the time to learn this skill for your future financial life. This may require sacrificing in some areas of your life and accepting a new standard of living.
With financial knowledge comes not only independence, but the confidence to start making decisions around money. This is why money management is an important step within your financial divorce planning.
There is no right or wrong way to spend your money, it all depends on your priorities and your expenses. However, there are a few practices to make sure you stay away from a financial crisis and manage your budget in a proactive way.
Your mindset when it comes to money is imperative. In fact, what I often deal with is people wanting to hypothesize. When you work with me on your money mindset, we actually look at the past three months of your spending. Chances are, in the past three months you’ve lived in accordance with the way your life typically goes.
First Step To Preparing Financially For Divorce
Do you feel more relaxed now you know how to prepare for divorce financially? Can you see how being well managed means you can finally enjoy life without stressing over money?
Preparing For Divorce: Financial Health Assessment Do-it-Yourself Workbook will show you how to remove emotion from the logic to gain control of your finances, relationship, and life.
This workbook is a great tool to assist you in gathering the information you will need to provide in divorce, and give you long term financial clarity and relief.
In this process, you will:
- Assess your financial health.
- Learn about your choices.
- Plan your finances.
- Create an action plan.
- List resources and support available.
- Innovate your relationships.
- Discover your power.
To ensure you’re preparing financially for divorce, grab a copy of Preparing for Divorce: A Financial Health Assessment.