When you're faced with a major life change like divorce it's crucial to approach it with preparedness (and courage!). The idea of your financial situation dramatically changing can make even the most confident person want to dig their head in the sand.
One of the most important aspects to consider during this process is safeguarding your finances.
Taking action and getting on top of the details of your current financial reality, and anticipating how they'll change, benefits you is a myriad of ways, including:
Making smart money choices during negotiations
Setting yourself up to financially succeed after divorce
How about those for meaningful benefits?!
Understanding Your Financial Situation
The first step on this road to financial independence and preparedness is understanding your current financial situation. Take stock of all your assets, liabilities, income sources, and expenses. This includes:
Sources of income: These include both your and your spouse's salaries, rental income, dividends, etc.
Assets: This category includes everything from your home, other real estate properties, vehicles, investments, retirement accounts, collections to valuable personal items and heirlooms.
Liabilities: This would be all your debts - mortgages, car loans, student loans, credit card debt, etc.
Expenses: These include your average monthly spending on necessities and luxuries.
The Divorce Planner has simplified the financial prep process for you with digital tools that walk you through what to do. For people wanting more of a guided experience, we recently launched the Ultimate Separation and Divorce Planning Course, an interactive and supportive learning experience tailored to your journey. The online course covers a broad range of topics, from understanding your emotional priorities to attaining financial clarity in divorce. The course structure offers flexibility—you can access lessons and resources at your own pace, with lifetime access!
All of our tools put you in the best position moving forward so you save time and money, become your own best advocate, and get you the outcome you want during divorce.
Build A Divorce Team
A crucial point to remember is that you don't have to go through this journey alone. There are a lot off affordable options out there that will help you create your very own divorce team. Building a support team, including coaches, financial advisors, divorce attorneys, and therapists, can be a game-changer. They can help you understand the implications of your financial decisions and provide strategic advice specific to your situation.
With the average cost of a "smooth" divorce in the United States topping out at $20,000.00, seeking professional guidance is the best investment you can make in your future. It helps you cut down on the actual cost of divorce because you're clear on your priorities, able to separate the emotional side of the process from the business side, and educate you on how to get the best outcome from your divorce.
Want to work one-on-one with divorce prep coach Alex Beattie? Click here to book a consultation or divorce prep coaching session.
Protecting Your Credit
Your credit score becomes even more important during and after a divorce. You're starting a whole new chapter of your life and having good credit will go a long way to helping you set yourself up. Steps to safeguard your credit include:
Check Your Credit Score - Knowledge is power. You can't build a better future unless you know where you stand. Start by getting a free credit report from each of the three major credit bureaus - Experian, Equifax and TransUnion - through the federally authorized website AnnualCreditReport.com. This will give you a clear picture of your current credit status.
Establish Your Own Credit - If you don't already have credit in your name, now is the time to set that up. Open a credit card and regularly make small transactions. Be diligent to always pay off your balance in full each month. This is a manageable way to build your credit rating and ensure financial independence.
Keep Making Your Payments - Even if finances are tight, make sure that you keep servicing your debts. That said, if you're struggling, don't be silent. Speak to your creditors about adjusting the terms. Regular, timely payments are vital to maintaining your credit score.
Separate Joint Accounts - As soon as possible, close all joint accounts you shared with your ex-spouse. This might include credit cards, loans or other credit facilities. This critical action saves you from potential negative financial implications from your ex's actions and limits potential disputes.
Securing Funds For The Divorce Process
With the average cost of an amicable divorce at between $15,000.00 and $20,000.00, it's critical to plan for the many financial pitfalls that can make the process cost more, and put you and your family in a dire situation. Don't overlook these 6 expense that most people don't account for during divorce.
It's vital to prepare for any uncertain expenditures. Some things you should be working on are:
Earmark funds for the actual cost of your divorce. The way you divorce will inform how much you need to squirrel away. This post, What Type Of Divorce Is Right For You, breaks down a few of the different types of divorce to consider and provides more detailed insights.
If you own a home and plan to keep it after your split, make sure you understand the annual hard costs associated with the property to ensure you don't put yourself in a dicey position after divorce. Answer these 4 questions BEFORE committing to keeping the family home after divorce.
Setting up an emergency fund to support yourself and any dependents you might have during the process.
Revise Your Retirement Plans
During the process of divorce, it's vital to reassess your retirement plans and accounts. Retirement assets acquired during marriage are often considered marital property, and finding a fair division is crucial. The future you've been envisioning might look different now that you're going to be single. By proactively addressing retirement during divorce negotiations, both parties can make informed decisions that benefit their long-term financial well-being.
If you haven't got a retirement plan, take this opportunity to create one. Consulting with a retirement expert ASAP will allow you to take those financial needs into consideration during divorce negotiations. Check out this conversation The Divorce Planner's Alex Beattie had with financial planner Josephti Cruz of The Wealth Garden FS all about how to safeguard your retirement during divorce.
Strategize So You 'Win' Your Divorce
Most people think that negotiating is left to divorce professionals, but that's not accurate. You are a part of your divorce team, and you can't get the outcome you want from your divorce if you haven't prioritized what's important to you, what you're willing to concede on, and what your goals are.
This post will help set you up for success - How To Get The Outcome You Want From Your Divorce Negotiations.
Update Your Estate Plan After Divorce
Divorce impacts all areas of your life, including decisions about your estate and who would care for your dependents were something to happen to you. Post-divorce, reviewing your wills, trusts, powers of attorney, healthcare directives, etc. is very important.