Navigating Divorce Finances
06/01/2023
Divorce is stressful, and it is expensive. They 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, or 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. Whatever has brought you to this blog, whether you’re recently divorced or planning to be so, these tips will help you get your finances 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 your legal documents. Gather them early so you have them ready whenever you need them. Here are a few papers to gather:
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- Assets: including checking accounts, savings, IRAs, 401k plans, and 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 so that you protect your credit
You don’t want your significant other to tank your credit score. Otherwise, you may be denied when you try to refinance your auto loan or buy a new car. Make sure you know whose name is attached to what and how much is owed. Rebuild your credit by paying off shared debts and getting a credit card in your name. Make sure you have a list of shared debts.
Step 3: Create a budget:
If there was any time to be frugal…it’s now. A review of current household expenses will allow you to go into your next chapter of life more prepared. Make sure you know the status of childcare expenses, insurance, bills, and debt. Make sure you consider your post-divorce income as well and then plan your budget accordingly. If you need help, try out the Dave Ramsey EveryDollar budget to see where your finances are going, set savings goals, and set a spending limit.
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. In addition to this, we suggest 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. Do this as soon as possible. In addition to a will, other documents you should add a beneficiary to include your 401k, 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. See how we at Coastline Federal Credit Union can help you build a strong financial foundation by calling us today.
Sources:
https://www.protective.com/learn/budgeting-101-how-to-financially-survive-a-divorce
https://www.nerdwallet.com/article/finance/7-ways-to-prepare-your-finances-for-divorce