Getting divorced creates emotional stress. One major area of stress is money. Divorce can result in significant changes in lifestyle and financial security.
Emotions already run high around the subject of money, but they can be even more sensitive when you are in the midst of a divorce. Any decisions you make during a divorce will impact your future, so it is important to try and reign in your emotions during this time.
There are a few things you can do to better prepare yourself and your finances for life after divorce. Here are 8 tips to help you separate finances and keep things calm and level during the process:
1) Learn how the divorce process works
The more you know about what to expect in the dissolution of your marriage, the better prepared you will be to handle it. In Colorado, the divorce process can be complicated, involving strict timelines to perform required steps, and paperwork you may not understand. The decisions you make have critical, and sometimes permanent, consequences. To understand the process for filing for divorce in Colorado, there are a few options you may want to explore. You can hire a divorce or family law attorney for full representation or you may want to use an online resource like Untie the Knot, so you can handle the divorce yourself.
2) Think long(er) term than the present
If your split is contentious, it may be difficult to consider the needs and best interests of the other party when making decisions about finances and the division of marital assets. It is important to think about the long-term interests of your future ex-spouse, and any children who may be impacted by your decisions. Generally speaking, making decisions that consider the long-term consequences for both parties results in better outcomes.
3) Get informed about your finances
No one enters a marriage preparing for divorce but you can leave one preparing yourself for financial security. Understanding your finances is a crucial to making good decisions when it comes to divorce. This can be even more challenging if you have never taken an interest in your household finances or investments. Even if you are only thinking about getting a divorce, you can begin to understand your financial position. Where should you start?
Get your documents together: Go to any financial institution you use for day to day banking, or where you may have assets, debt, credit, or investments.
Obtain copies of all of your financial documents. This includes tax information from the IRS. You should have a variety of statements like W2s, pension information, federal and state income tax returns, credit card statements, car loan statements, student loan statements, retirement accounts, property tax information, mortgage statements, and any insurance policies. If you have a prenuptial agreement, you will want a copy of this as well. It is also worthwhile to get a copy of any wills or trusts that exist.
Make a budget: You may have had a budget during your marriage but you will need to create another one that reflects your change in circumstances.
You will want to know how much money you have coming in, what is spent on things like household expenses, any children you may have, debt repayment, car payments, insurance payments, etc.
There are several good budget websites and apps available online or your bank may offer a budget template that will help you get started.
Be credit-conscious: Pull your credit reports to see where you stand. This will not only help you understand your own credit history, but it will show you any accounts that may have been opened in your name by your former spouse and indicated any late, or missed, payments that you may have been unaware of.
If there is fraudulent activity or issues with your credit that were not caused by you, you can proactively approach your lenders and inform them of your impending divorce and explore debt forgiveness possibilities.
If you are feeling overwhelmed by the financial planning aspect of your divorce, you may benefit from seeking the advice of a financial advisor. Your eligibility for spousal support will be determined by your documentation, and a financial advisor or financial planner can help you make sense of your financial situation and pull things together in a useful way. Untie the Knot keeps a list of financial advisors who are experienced in dealing with divorces. Please, reach out to us at https://www.untietheknotco.com/contact if you would like a referral!
4) Separation of finances
It’s important to be educated about what expenses are joint, or “marital”, expenses. You may be surprised! As much as you can, try to keep the relationship civil and transparent when it comes to finances. Like it or not, you may be responsible for joint expenses until you finalize your divorce.
Don’t plan to rely on “alimony”. The amount of support you may be entitled to, if you are entitled to anything, will not be decided until a number of factors are considered. Your employment income or other revenue may be all you have so you will need to prepare for this possibility.
At this time, it is wise to update your will and update the beneficiaries of any insurance policies that you may have.
You will want to ensure that you have adequate insurance in place for you and your children if you have not already done so.
5) Decide about the house
The house: t's a major asset of the marriage, but it can also be a liability. Give this topic some thorough consideration so you can rationally decide if the fight over the house is one worth having.
There are a number of factors involved in this decision-making process. The most important thing to consider is affordability. It is likely that the budgeting process revealed some insights into what you can, and cannot, afford.
You may require a mortgage to take over the home, or you may even have to pay your spouse half of the value of the home and any additional marital assets.
Consider, does the home need any major repairs or renovations now or in the near future? Should you have your home inspected by an expert so you know what repairs may be needed?
Finally, are you prepared to take on all of the maintenance and upkeep of your home? The dissolution of a marriage means the loss of a household member so that work will fall on your shoulders. Are you prepared to act as handyman and landscaper post-divorce?
Once you have the facts, including the hard and soft costs of ownership, you'll be in a better position to decide if you want to keep the home or change to something different in the future.
6) Seek professional advice
By being an active participant in the divorce process can help you regain some control and enable you to advocate for your own best interest.
Untie the Knot can educate you on the divorce process and better understand how financial decisions may be made by the court in your divorce case. Divorce Education can also help you evaluate if you feel comfortable with a “Do it yourself” divorce, or if there are complexities in your case that would indicate you would be better supported with representation from a family law attorney.
7) Emotional self-care
Divorce can be complicated and feelings of anger, betrayal, and sadness are common. But, these emotions can often cloud judgment and impede the practicality that is necessary for figuring out post-divorce finances.
If you have been forced to forfeit marital assets and possessions that you had hoped to keep, allow yourself to mourn. Giving up the home in which you raised your children or family treasures that hold sentimental value, is not easy.
Work to remind yourself that you can create new memories with your children or designate new family heirlooms that can be passed along for generations to come. Right now is not forever. Each day presents a new opportunity to do something special.
Take time out to be kind to yourself. Speak to a counselor, family therapist, or a close friend. Do not try to shoulder the emotional burden on your own. Talking through your feelings can help you move past them.
The clearer your mental and emotional state, the better able you will be to make important financial decisions.
8) Look to the future
It may feel like you will not be able to get through this split, emotionally or financially. But the truth is, you will.
Time heals all wounds and eventually, you will be able to build your own life and celebrate your financial stability.
Don’t rush the present but keep an eye to the future. With adequate financial planning and careful consideration, you can (and will!) emerge on the other side of this divorce with a better sense of self and a better handle on your finances.
Divorce can take a heavy toll on your emotions and your finances. But, if you heed the 8 tips laid out in this post, you can navigate this difficult period more easily and leave your marriage with more control over your financial future!