When spouses see the writing on the wall as it relates to their marriages, their financial concerns tend to be focused on distribution of marital property, child support payments, and potential alimony, but the financial reality of divorce is a lot more complicated. Any personal financial planner can tell you that getting divorced could mean anything from losing 50 percent of your net worth to restructuring your finances for the purpose of avoiding further losses.
If you feel a divorce is inevitable in your life, here are five financial steps you should consider taking.
1. Start Thinking About Your Individual Credit Score and Profile
Joint credit accounts usually reflect a lower score right after the court issues a divorce decree. You can mitigate this situation by applying for credit cards before the divorce is finalized. The idea is to make a few purchases and pay off most of the balance so a fresh credit score can be established.
2. Review Your Insurance Policies
Unless a court order directs you to keep your soon-to-be former spouse as a beneficiary, you should get in touch with your insurance agent and make the necessary changes to whole, term, or group life insurance policies. Ideally, your children should be the primary beneficiaries. Moreover, you may also want to think about who would receive and administer insurance payouts on behalf of minor children. Other policies to review include auto, health, and homeowners insurance.
3. Retain the Right Professionals
Divorce attorneys should be able to provide some advice regarding your personal finances, but it will be limited to a few basic recommendations. You should seek the advice of a San Diego financial consultant to figure out how to manage your income, expenses, savings, and investments once you’re no longer married. Keep in mind there could be many financial aspects to consider, such as estate planning, taxation, new monthly budgets, and debt repayment strategies.
4. Gather Important Financial Documents
Bank statements, investment certificates, tax returns, and insurance policies are some of the financial documents you should gather before the divorce proceedings get too far ahead. Your attorney will likely ask you to do this so he or she can review whether your spouse has been secretly withdrawing money or mismanaging funds. Keep in mind you may need to refer to these statements when filing future tax returns.
5. Minimize Your Expenses and Start Saving
If your spouse is the primary breadwinner in your household, your period of financial adjustment may prove to be challenging. One of the best strategies to alleviate this situation is to practice frugality and start building cash reserves before the divorce becomes final. Waiting on the first child support, alimony, or property separation payment to be deposited is not a sound strategy because you’ll have little control over such legal obligations.
Preparing for a divorce is just one of the many reasons you might need to enlist the services of a trusted financial planner. Jan Gleisner has also helped many business owners realize their financial goals. If you need reliable financial advice, reach out to Jan Gleisner today at 858-337-2385.