Do you have some financial tips for those who may be going through divorce?
When you’re going through a divorce, your finances could be the last thing on your mind, but the decisions you make now will affect you for a long, long time, so be sure not to rush the process because you’re emotional and just want it to be over.
If we played the word-association game with “divorce” you’d probably say “lawyer,” but it’s equally important to get a trustworthy financial advisor to help you navigate the process and avoid common mistakes. If you’ve found yourself on the way to single…again, here are a few tips:
First, know what you have. Gather all of your financial information—all your bank statements, investment assets, tax returns, bonus statements, retirement assets—make copies of everything. These documents have a funny way of disappearing after divorce proceedings begin.
Next, that same “state of the union” check-up should include obtaining a copy of all three of your credit reports, which you should monitor to ensure your credit score stays stable until the divorce is final.
Also be sure you know your status on all kinds of insurance (home, car, health, life). Who is ensuring the premiums are being paid on time and how will these policies—which may be family policies—change after your split? Be sure you are continuously covered. In light of your split, you may have different thoughts on who should be the beneficiary on your life insurance and retirement plans, so be sure to consider that too.
After you’ve completed the fact-finding phase, you need to take steps toward planning for the future. The first step is to separate your finances. Close all joint accounts—that includes bank accounts and credit cards. Next, create accounts in your own name and draft a revised budget for yourself. Where do you stand on your own? Have you and your spouse decided how to handle possible future expenses, like education costs for your children? Speaking of children, what do you think would be a fair amount of child support? How about your retirement? This is why it’s so critical to have a good financial advisor. One non-negotiable: have an emergency fund that will cover you for at least six months.
Also, dot your t’s and cross your i’s. You’ve already sifted through a mountain of paperwork, but don’t forget to work with your lawyer to draft a new will, health care proxy and power of attorney.
It’s definitely a lot of work and can feel overwhelming, but it’s manageable. Just keep your focus on the endgame and take it one step at a time.
Any parting advice?
Yes. Everyone gets married with the best of intensions and high hopes for the future. But the fact is that nearly one in four marriages end before the couple’s tenth wedding anniversary. It’s not romantic, and hopefully you’ll never need it, but a prenuptial agreement can save everyone a lot of headache…Unfortunately, you’re on your own with the heartache.
I guess there are other experts for that!