Divorce Financial Advice from a Certified Divorce Coach
No matter your level of financial literacy, going through a divorce really puts your finances under the microscope. Whether you are a stay at home parent and need to educate yourself on how to build a post-divorce budget or perhaps you are a seasoned money pro and need to understand the tax ramifications of divorce, it is ultimately your responsibility to get your bank account in order. Transitioning from a dual income household to a one income household requires planning for all parties. For most of us, when we hear terms like budgeting, forecasting or investing our eyes glaze over and we want to run a mile. But it really doesn’t have to be that hard or overwhelming. We approach handling finances with these three values in mind: prioritization, organization and simplification, with a heavy emphasis on simplicity. With that in mind, here are some basic pro-tips from our money magnifier
Determine your financial goals
From the get go set clear, values driven goals to serve as your North Star through your divorce and beyond. Setting financial goals around your priorities and values is important in developing a good legal strategy and splitting assets accordingly. For example, you may want to invest in education, buy a house, or start a business all of which require cash. After the uncertainty of a divorce, you will probably want some stability in the form of an emergency fund, money toward retirement or a source of income. Having financial goals facilitates the legal process, builds a foundation of security and also creates a vision for your post divorce life. If you have never had financial goals of your own, there is tremendous empowerment and independence to be gained once you start budgeting for a successful life after your divorce.
Create a budget
A budget is a vital tool to have on hand both pre- and post divorce. Without a budget you're shooting blind when it comes to settling your case and achieving financial independence after. It’s essential to have a transparent understanding of cash coming in and cash going out so that you know what you need or can afford. It’s important to check state laws on alimony and child support, understanding whether state or equitable distribution or community property. After divorce, child support, alimony payments, redistribution of assets, and legal fees will be a big part of your financial reality whether you are the payor or the payee. A budget isn’t just about financial clarity but also financial confidence. When you go through a divorce, it feels like your entire life is spiraling out of control and creating a budget allows you to regain some empowerment and agency. Once your split is final, the peace of mind that comes with having a roadmap, knowing where you need to cut back and where you have a safety net is priceless - pun intended! And if doing this alone still feels intimidating or overwhelming, our certified divorce financial analyst has created the proprietary Divorce Budget, to educate you and get you on your way.
Gather financial documents
Many of us are guilty of burying our heads in the sand on this one, only to be in for a rude awakening when our attorney asks for evidence of our entire existence! But the truth is gathering all your documents pre- divorce streamlines the legal proceedings - which equals less in fees - and sets you up for legal and financial organization post-divorce. Your attorney needs all these documents in order to protect your rights and work toward a fair settlement that accounts for all your assets and liabilities. If your spouse has taken the lead on much of this, there is a high likelihood that you don’t know where to find the information you need or perhaps you don’t even have passwords to some accounts. Allow yourself plenty of time to find what you need and download our quick checklist here to get organized.
Understand your marital assets
Knowing what constitutes marital vs. non-marital assets, and debt, is vital for property division. Taking the time to understand what falls within the marital estate and what does not, also safeguards against a spouse that may try to hide or manipulate information. In addition, once you have a comprehensive understanding of what you are entitled to, you may want to consider getting certain property valued. A good certified divorce financial analyst and lawyer can work together to creatively split assets and debts equitably but not necessarily 50/50 depending on your state. Of course, this is only possible if you know what you have to work with. Finally, understanding your marital assets will help build post-divorce stability as you are better positioned to make informed decisions regarding those goals we talked about earlier.
Protect your credit
Your path to financial freedom cannot occur without good credit. If you have not already done so, run, don’t walk, to get a free credit report. As you prepare to split assets, having a good credit score will help you qualify for a loan if you have to buy your spouse out of certain assets, like the house. Your credit score becomes even more important after the divorce when landlords and lenders will want to see you are in good standing before renting you a house or qualifying you for a loan. Basically, you will have more opportunities at lower interest rates with a proven track record of paying back debt. Think of your credit score like the numbers on a scale - except most people want the numbers on a scale to be lower and the numbers on their credit report to be higher! Nevertheless, in both cases it’s good practice to periodically check your number and make healthy adjustments when necessary, knowing it may take time to see any improvement. Your credit score may be low for several reasons: you are paying bills or credit cards late, the amount of credit you are using relative to your credit limit is high, you have too many credit cards with high balances, you are only using one type of credit rather than a mix of credit cards, loans and/or mortgage. You can go to Annual Credit Report as a reputable source for a free credit score.
Consult a financial professional
Finally, and most important, this is not a time to skimp. Working with a seasoned professional in this area will return its investment ten-fold, not to mention the peace of mind that money can’t buy - another pun intended! Many times we don’t know what we don’t know and a certified divorce financial analyst can help identify and teach you what you need to know and/or put in place. So many people go into divorce terrified to face their financial situation, yet undergo a transformation and come out feeling more financially confident and competent than ever before. You can achieve sustainable financial growth by working with our certified divorce financial analyst that is skilled at prioritizing, organizing and simplifying your financial goals.
