Navigating Divorce Finances
Divorce is stressful, and it is expensive. They can tend to cost as low as $15,000 and as high as $20k for most couples. To put it into perspective, that could be the cost of a new car, a college tuition loan, and medical bills. These expenses most commonly are due to attorney fees, court costs, record deeds for your home, and so much more. And along with divorce costing a pretty penny, the divorce process rarely follows a straight and narrow path, but these steps may help you financially keep on track. Whatever has brought you to this blog, whether you’re recently divorced or planning to be so, these tips will help you get organized.
Step 1: Gather your financial documents
While the process of divorce may seem long, you don’t want to wait until the last minute to gather all of your legal documents as this can cause unnecessary stress. Instead, gather them early and have them ready whenever you need them. Here are a few papers to gather:
- Assets: including checking accounts, savings, IRAs, 401k plans, investments
- Property: including home, land, and vehicles
- Household expenses: including phone bills, Internet, water, insurance, electricity, cable, and streaming services
- All debts
- Bank statements, tax returns, and loan information
Step 2: Know what bills are due and when, and protect your credit
The worst thing that can happen is you want to refinance your car or buy a new one with a loan, and you can’t because your credit has plummeted due to your significant other. Whose name is attached to what? How much do you owe? Help yourself by rebuilding your credit by paying off shared debts, and getting your own credit card. This will create a path forward to re-establish and rebuild. Gather all of these documents, and be sure to make copies.
Step 3: Create a budget:
– If there was any time to be frugal…it’s now. By reviewing current household expenses (one of the tips to do above, as well) you will go into your new chapter of life more prepared for things that are subject to change, especially childcare, insurance, bills, and debt. You should also consider your post-divorce income and plan for that as well (even if is subject to change). If you need help, try out the Dave Ramsey EveryDollar budget to help see where your finances are going, set savings goals, and set a spending limit. Link is here!
Step 4: Start your own retirement plan
It may seem like you’re too late in the game to start another retirement fund. Start small. You can consider requesting a Qualified Domestic Relations Order (QDRO) as part of your settlement; this document will help transfer your assets from a former spouse’s retirement plan and put it into your own without any tax consequences. Other than this, we advise getting a financial advisor to help sort out how you can keep saving for your retirement.
Step 5: Change your will and Beneficiaries
If you don’t have a will, it’s a great idea to create one; but if you do, it’s time to reflect and decide on what a divorce means in terms of how you adapt your new beneficiaries. And act as soon as possible. Other than a will, other documents you should have a beneficiary on would be a 401k, an insurance policy, and more. You should also change this status as soon as possible with the help of consulting a legal team.
We know divorce is anything but easy, especially with assets and possibly children involved. These tips are just the start of how to prepare yourself to overcome any financial challenges throughout your divorce.