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The emotional stress of a divorce can be overwhelming. Take care of yourself during this difficult time, but don’t forget to take care of your finances as well. By doing a little planning now, you can avoid big headaches later.
At Global, we’re here to help answer your financial questions as best we can. But know that details of your finances could be dictated by divorce proceedings, so check with your attorney before making any changes.
Here are four things you can do to help manage the process and reduce your stress.
1. Manage Your Budget
Develop a budget that will reflect your new situation. If your ex-spouse took care of the family finances, this may take some homework on your part. Look at past income and expenses, and then adjust for your ‘new normal.’
Consider new expenses such as attorney’s fees, child support, and alimony payments, as well as auto, homeowners, and other insurance. If your health insurance will be impacted, you will need to account for this as well. Divorce is typically considered a Qualifying Event; this should allow you to make changes outside the regular open enrollment period, but the cost of your coverage may change.
If you need to find a new place to live, you will need money to fund a move and get set up in your new home. Also consider that you may need to begin paying for things your ex-spouse provided, such as lawn care, cleaning services, home repairs, childcare, car maintenance, and others.
If you plan to sell assets because of the divorce, you may face capital gains or other tax consequences. Be sure to ask your financial planner to estimate these expenses before anything is sold.
2. Manage Your Credit
You’ll want to check your credit early in the divorce process; doing so helps you identify accounts or debts you didn’t know about and gives you a benchmark for your credit status.
Make it a point to monitor your credit regularly and fix any errors immediately, especially if you plan to get a mortgage or car loan on your own. And know that your credit score could drop if your ex doesn’t pay joint bills or adds additional debt to joint accounts.
3. Manage Your Accounts
If you don’t already have them, open checking, savings, credit card, and investment accounts in your name only. While you’ll want to avoid taking on additional joint debt that could complicate your divorce agreement, check with your attorney before freezing or closing any accounts held jointly.
Talk to us to make sure you’re set up with the right types of accounts. For example, while a Global Latitude Checking account may have made sense for you when you were married, perhaps a Core Checking account may work better for you as a single person.
Gather copies of all your financial paperwork, such as tax returns; checking, savings, and investment account statements; real estate and mortgage records; vehicle titles; credit card and loan statements; utility bills, and others. Once your attorney says it’s okay to do so, you will need the information to close joint accounts; change wills and powers of attorney; modify your beneficiaries, and more.
4. Manage Your Goals
As you look ahead to your new life as a single person, you’ll need to re-evaluate your retirement savings and other financial goals. While all this may initially feel overwhelming, enlist the help of a financial advisor. For example, now that you’ll be on your own, it will be even more important to have an emergency savings account. Make this a budget priority.
Did you know?
Almost 50 percent of U.S. marriages end in divorce. The rate is even higher for second and third marriages. And sadly, worries about or disagreements over money are among the leading causes of divorce.1
In 2019, tax rules regarding alimony payments changed. The person receiving the alimony money no longer pays tax on the income, and the person making the alimony payment is no longer able to deduct the payments from his or her taxable income.2
