When you or your spouse decides to divorce, one of the first concerns that will come to mind is money. It’s likely you and your spouse have had comingled finances for some time. How will you divide that? What’s fair? How will distribution of both income and debt be decided?
Money is always an important””and often contentious””consideration in any divorce. And in today’s economy, it is even more so.
Here are a few steps to take to reduce the amount of friction around finances as you move through the divorce process:
- Step back and take a look at your current financial situation. Understand your assets and debts. Which are in your name? Which in your spouse’s name? Are your accounts joint or separate? When reviewing your current situation, try to be as realistic as possible. The courts will divide your assets and debts in an “equitable” fashion, but that does not always mean a 50/50 split. Try to get a clear picture of what’s yours, what’s your spouse’s, and what’s shared.
- Create a budget for life as a single person. Living on one income will likely be an adjustment for you and may require some life changes. Drafting a budget””even if you do not know all the exact dollar amounts””will help you get a better picture of what a divorce will mean to your individual financial situation.
- Collect your previous year’s tax information. Make copies of your most recent tax returns. During the divorce process, you will be required to give full disclosure of your complete financial situation. Have these collected and copied while you have easy access to them.
- Start establishing your own credit. Opening your own credit card while divorcing may seem counter-intuitive when your financial situation seems most precarious. However, this is an important step if you have only had joint credit card accounts for a long time. You will need to establish credit separate from your spouse’s history.
- To the extent possible, keep the lines of communication with your spouse open. This might be the hardest “tip” to try. In some ways, your spouse may be the last person you feel like talking to. Your emotions may be up and down on an hourly basis, and you’re likely dealing with anger, sadness, bitterness, or all of the above. But this is a very important step. The financial decisions you make now will affect you for the long term. For example, if you own a house together, how will you move forward? Which of you will claim the children in taxes? The house? These tough choices should be made now, if possible.
In this economy, finances are stressful before you add divorce into the mix. When facing an imminent divorce, knowing your finances is just that much more important. Planning ahead and making smart decisions can make a painful and difficult process a little easier.