While disagreements over money are a common driver of divorce, most people decide to end their marriages for emotional, rather than financial reasons. Even if money is not the primary reason to choose divorce, it is an important consideration for people in unhappy marriages. Divorce can lead to financial ruin for the unprepared. This is particularly true for people whose spouses make significantly more than they do.
Income, assets, debts and taxes
There are several things you should be prepared to do to safeguard your financial health in anticipation of divorce. First, you need to understand that divorce will change your financial life. Many shared expenses will suddenly be yours to manage alone. You should understand which expenses will likely remain your responsibility after the divorce. If your income will not cover those expenses, you have some difficult decisions to make.
In addition to a budget, you should have a solid understanding of where your assets and debts reside before you get a divorce. Without that knowledge, you could end up with far less than you deserve and no way to make ends meet. Identifying assets and debts in advance also makes it easier to complete the necessary step of removing your former spouse's name from important documents. Things like mortgages, insurance policies, retirement and bank accounts and other documents should reflect your sole ownership. In some cases, you will have to close accounts and open new ones to accomplish your goals.
The importance of credit
Your credit may seem like a nebulous or undefined asset, but protecting it is an important part of the divorce process. A divorce can undo years of fiscal responsibility in the eyes of creditors. You may find it difficult or impossible to get a new mortgage or take out new loans if your credit score is adversely affected. Divorce planning can help you preserve your credit score and ensure your financial health going forward.
Pick your advisors carefully
You probably wouldn't let your spouse choose your divorce lawyer. Likewise, it may not be a good idea to let decisions made by your former spouse control your financial health. If your accountants or financial advisors would chosen by, or in conjunction with your ex, it may be time to make a change. If you do not feel protected and respected by your financial advisors, you should look elsewhere.
A divorce can be a new beginning in every aspect of your life. It is a chance to reevaluate your priorities and take control of your future. You should not overlook the value of taking control of your financial life at the same time you complete your divorce.
Source: ABC 13 News Now, "9 things you should do after a divorce to save your finances," by Janet Berry-Johnson, 19 January 2017