5 Smart Financial Steps to Plan a Divorce
By Nancy A. Hetrick, CDFA®, MAFF™, AWMA®
1. Make Sure You Have Access To Some Money
An obvious first step, but it can mean a credit card in your name only, a separate bank account in your name, or even a stash of cash in a shoebox or safety deposit box. Many couples function just fine working from joint accounts during their divorce, but I’ve also seen vindictive spouses empty joint accounts as soon as divorce is mentioned. You don’t want to be left without access to funds to pay for divorce professionals or to move into a place of your own. Be smart and take the necessary precautions. Of course, don’t take this to mean hide money, because money will be something that you disclose later in the divorce process.
2. Gather All The Financial Documents You Can Get Your Hands On
This will help you to be prepared for the settlement discussions to come. I’m talking about bank statements, retirement and investment account statements, mortgage statements, paystubs, tax returns, insurance policies, credit card statements, and anything else that seems important. Having copies of all this not only helps you stay informed about your financial situation but will save you money when you meet with a divorce professional and already have an organized file of your financial life.
3. Take Some Time To Think About What You Want For The Future
It can be easy to get so wrapped up in the details of the present that you forget about what’s next. Don’t. Stop and take some time to think about your life after your divorce. In particular the financial side. Where do you want to live? What are your expenses going to be like? I recommend you put together a budget outlining all your expected living expenses. This will give you some clarity about what you’ll need moving forward and will lessen some of the anxiety about the future.
4. Find A Divorce Coach To Talk To
This may not seem like it is a financial step, but it is. A professional on your team that will help you make sound decisions can make a big financial impact on your future. Emotions run high during the divorce process and as we said earlier, you thinking will be cloudy. The Divorce Coach will help you work through those emotions to free your mind up for the business of divorce so you can objectively focus on the financial outcome.
5. Finally, Think About The Costs Associated With A Divorce
If you think it’s going to be a battle for every asset and advantage, then attorneys will be involved and $20,000 or more will evaporate from your bank accounts. If you envision a more amicable process then perhaps mediation is in your future. It will allow the two of you to talk through the issues and agree between yourselves what works best, saving a lot of money in the process. In either case you may want a financial professional, like a Certified Divorce Financial Analyst®, to be part of your team. The CDFA® can help remove any confusion about your financial situation, present options for the division of your assets, and provide a picture of how a given settlement will impact your financial future 20 years out.
A divorce is probably the largest financial transaction most people will undertake during their lifetime so make sure you are fully informed. These 5 simple things will get you started on the right track and help make the difficult process of a divorce go more smoothly.
Nancy founded Smarter Divorce Solutions in 2011 after going through her own less-than-optimal divorce. She was disappointed that the only divorce option involved a criminal system. After choosing to self-file, the financial mistakes made plagued her for years and she became passionate about helping others not make the same mistakes. In 2020, she authored the textbook on Divorce Financial Planning and is renown nationally as an expert in the field. When you struggle with all of the financial decisions to be made in your divorce, trust Nancy to be your guide.
March 29, 2021
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