Navigating the Financial Challenges of Divorce

So you are facing or going through a divorce and have no idea where to begin when it comes to the finances. I’ve been there and it’s not as scary as it may seem, especially if you have someone who can go over it with you. When a marriage ends, it often means dividing up assets, debts, and figuring out new financial responsibilities. Managing your finances well during this time is key to making sure you come out stable on the other side. This is a basic starting guide specifically tailored to help empower you through the financial maze of divorce.

Get a Clear Picture of Your Finances

First things first, you need to know where you stand financially. Gather all your important financial documents like bank statements, tax returns, and details about investments and debts. If you don’t know where to find some of these things, call your bank(s), financial advisor (if you have one), mortgage broker, etc. Any of these people will be able to provide or direct you to the documents you need.

• Make a Detailed List: Write down all your assets and debts, including properties, cars, bank accounts, investments, credit card debts, and loans…don’t forget school loans,
• Know Your Income and Expenses: Track your monthly income and expenses to get a handle on your cash flow. This will help you plan for your finances after the divorce. There are apps and websites that provide excellent layouts for organizing all of this. I, myself, used Quicken, but there are others and that one is not compatible with Apple. If you have a worksheet from the state that you have to fill out, that can help you with categories for creating your own table or spreadsheet.
• Check Joint Accounts: Look at any joint accounts and decide what to do with them during the divorce. It might be a good idea to close or freeze them to avoid any problems. Always follow any court or legal instructions on this.

Get Help from the Pros

If you are dealing with a financially complicated divorce with lots of varied assets, getting some professional help can make a big difference. Think about hiring, or at least meeting with, a financial advisor or a divorce financial planner to guide you.

• Financial Advisors: They can help you understand your financial situation, create a budget, and plan for your future needs. Some will meet with you for an initial consultation free of charge, which may be all you need. If you are looking to sign on with one, make sure you shop around and meet with a few before choosing.
• Divorce Financial Planners: These experts specialize in divorce finances. They can help you divide assets, understand tax issues, and make sure you get a fair settlement. Many financial advisors can provide this service also.
• Family Law Attorneys: A good lawyer is crucial for understanding your rights and ensuring the financial settlement is fair and legally sound. It is important to have an attorney review any divorce agreements before you sign them, but the attorney may not be as knowledgeable about finances unless they have specialty experience in that area. A QDRO (Qualified Domestic Relations Order), for example, is not something a lot of family attorneys prepare.

Plan Your Budget for the Future

Creating a budget for after the divorce isn’t exactly enjoyable, but it is essential. It will help you adjust to your new financial situation and make sure you can cover your expenses. Plus, getting it “on paper” means you don’t have to keep going over it in your head repeatedly. There’s already enough to think about without the added pressure of money!

• Assess Your New Reality: Figure out your post-divorce income and expenses. This might include changes in housing, utilities, insurance, and other living costs. Does it make sense to downsize your home? House hunting with the kids or a friend can be a fun process if you want it to be!
• Prioritize Your Expenses: Identify your essential expenses like housing, utilities, food, and transportation. Cut back on non-essential spending until you have a clear picture of your finances. These can all be itemized in the financial picture you create in the first step. You probably don’t need that coffee from the drive-thru window everyday.
• Build an Emergency Fund: Set aside some money for unexpected expenses. This is really important for keeping you stable during and after the divorce. Admittedly, this is not always possible. Do your best to look for ways to create this. Even a few dollars a week in an envelope is a start.

Dealing with Debts

Divorce means dividing debts as well as assets. It’s important to figure out who is responsible for what to avoid future issues. A mediator is a great resource for helping you and your soon-tobe-ex with this, and costs less than an attorney. In some states, meeting with a mediator is required.

• List All Debts: Write down all your debts, including mortgages, car loans, credit card debts, personal loans, school loans, etc.
• Determine Responsibility: Identify which debts are joint and which are individual. Work with your attorney to ensure the division of debts is fair and legally binding.
• Consider Refinancing: Sometimes refinancing debts into individual names can help clarify financial responsibilities and prevent future conflicts. Discuss this option with an attorney first.

Plan for the Long Term

It’s important to plan for your future after the divorce. This is a chance to reassess your financial goals and create a new financial plan.

• Retirement Planning: Review and adjust your retirement plans, or see if you can start one if you don’t already have one.
• Insurance Needs: Reevaluate your insurance needs, including health, life, and property insurance. Be sure to update beneficiaries as necessary!
• Set New Financial Goals: Set new financial goals that align with your post-divorce life. This might include saving for education, travel, or other personal aspirations. Goals give us hope and motivation for moving forward.

Dealing with the finances in a divorce can be one of the hardest tasks of the whole process, but it’s just numbers and working through it can reduce the emotional overload. Hopefully this basic guide will give you some confidence to start managing your money with careful planning, professional guidance, and a clear understanding of your financial situation. By working through these steps, you can navigate through this challenging period and feel more secure in creating your new beginning.

Are you going through a financial transition due to divorce? As a transitions life coach, I can help you work through the overwhelm of these financial tasks. You already have the knowledge inside you. I can help you uncover it.