Divorce is a complicated affair. It’s financially and emotionally exhausting. You have to split everything, have your finances and purchases scrutinized, the one you loved the most now becomes your adversary, you have to see who gets the kids and when, you may possibly lose half of your assets, plus, you have to go through your divorce terms with your lawyer, which is an emotional wreck of an experience unto itself. That is why good financial planning becomes crucial to maintain your financial sanity amidst emotional instability.
Many people consider help from a financial consultant after getting a divorce. “Better late than never” is okay, but it is ideal to discuss your finances with your financial advisor before getting a divorce. If you’ve found lipstick on the collar, a long hair that isn’t yours on the couch or too much of his time and money seems to go missing lately, let’s prepare for the worst and hope for the best.
We sincerely hope that this blog helps streamline things easier for you and assist you in arranging any necessary documents. With that said, let’s see how you can financially prepare for a divorce.
Tips for Financially Surviving a Divorce
Getting a divorce isn’t cheap. A Bankrate.com study found that the average cost of a divorce is approximately $15,000, but in divorces, with custody battles, the costs can exceed a whopping $100,000! Expenses that commonly follow after a divorce are,
- Court cost
- Mediation cost
- Attorney fee
And much more.
Divorces also result in a decrease in both household incomes and net worth, which may cause a change in the standard of living for both individuals.
Unfortunately, the situation gets far worst for women due to the gender pay gap. This makes it harder for women to start over with everything from opening a credit card, renting an apartment, and loaning money to buy a car or house.
These expenses can become hard to manage, and you may want to consult with a financial professional to give you guideance. Nevertheless, here are five essential tips for financially surviving a divorce.
1. Seek Help From a Finance Consultant
If your spouse is the house’s money manager, taking hold of household finances can be tough for you. Especially during the first few months. Don’t get emotionally overwhelmed. Take it in baby steps. The financial complexities of a divorce can be overwhelming for even the best accountants. Meet with a financial consultant before you file for divorce. This will save you time and trouble and brace yourself for a trip down a rocky path.
2. Record Your Assets
It’s important to note down your financials, such as loans, savings, and cash in hand. Put a notebook together of any and all statements, whether they are copies or actual old statements. This information will help you assess who is liable for issues like the loan you were sharing. If your spouse took a car loan and you were helping with it after the divorce, this loan becomes the bearer’s responsibility. If you need to, video tape all important possessions as proof. Save all receipts.
3. Start Saving Money
Now is the time to become frugal. Start saving every penny because it will assist in paying the fees we mentioned above. Hoarde as much cash as you possibly can.
4. Get Ready to Sacrifice
Divorces are messy, and you don’t always walk out with everything you want. So, prioritize your assets and what you’d like to keep. Be fair about it and accept that your standard of living is going to change. Prepare for the worst, and keep in mind that you might not win everything. Make lists of what you must have, don’t want and can use for a negotiation play.
5. Prepare to Work Together
As much as you don’t want to, you have to play nice with your ex-partner. The more you cooperate, the easier it becomes to divide your estate. Plus, your divorce will cost less overall, and you’ll both be better off. Try to keep it civil.
Silver Linings of a Divorce
While it may all sound grim, divorces can be the start of a better life for many. You can use this fresh start to begin saving money, increasing your income, limiting your spending, and achieving your financial goals.
- Increase your income
This may be one of the best ways to recover financially. While it is easier said than done, there are a few ways you can achieve this. Looking for better work opportunities with higher pay, asking for a raise or promotion, or starting a side hustle or a part-time job. Take this as an opportunity to realize your dreams!
- Set a new monthly budget
Make a budget. Review it periodically. Now that you are on your own, your household income and expenses would have taken a different turn, and you will be budgeting on your own after a long time.
- Your net worth
Calculate the difference between your assets and liabilities. It is important that you look at your actual financial picture before starting life anew.
- Eliminate expenses
There are chances that your household income has decreased after your divorce, and you can’t seem to afford certain expenses anymore. Live within your means.
It is wise that you reduce your spending and eliminate unnecessary expenses to bounce back financially.
- Rebuild your savings.
Divorces are so costly that you end up with almost no savings at all. Your first priority should be rebuilding your emergency fund. Usually 3-6 months.
- Financial goals.
As a married couple, your financial goals may have been very different, so now it is time for you to set new ones. Ask yourself how you want your life to look like 5-10 years from now and set goals accordingly.
- Penalty-free early access to a retirement fund
A divorce is one of the few situations a person can gain early access to a retirement fund. Although it is a risky move, it gives the newly divorced a few options that they may not already have. Make sure you properly re-invest the assets and secure your financial future.
- Social Security spousal benefits
If you were married for at least 10 years or your spouse is 62 years or above, you can file for Social Security spousal benefits at retirement. Furthermore, claiming spousal benefits won’t affect the monthly payments of your ex.
- College financial aid
While divorce is stressful and exhausting, it is more difficult when you have kids. Not to mention the emotional trauma kids go through. While divorces may lower your income, the Federal Student Aid will put your child in a better place through college funding.
Ending Note
Getting a divorce isn’t easy, and you best prepare for a financial mess, but that doesn’t mean you can’t overcome it. It’s like the old saying, “If you fail to prepare, you prepare to fail.” A Lawyer will give you a (several page) list of financial statements, receipts and other materials to collect. Take this list seriously and procure these items, this will help you organize your financial life and get you back on track.
Meet with a financial advisor to sort things out and help keep things even. If you haven’t reached out to a financial consultant before filing your divorce, you still have time. Although everyone’s situation doesn’t improve after a divorce, we hope these financial tips will help you stay afloat and manage the financial and emotional stress that comes with this change.
