After my last article on Surviving Divorce, a wise friend sent me a reminder to add to the list – “get someone to sit down with you and organize your financial life – the assets you are to receive, the debt you may have accumulated over time leading up to divorce, your new budget, new priorities, etc.”
Which motivated me to write a separate article on the financial side of divorce.
Going through a divorce is extremely emotional and stressful even without any financial concerns. BUT finances are almost always a concern and can add to the burden and unpleasantness of a divorce. This is why I highly recommend getting professional help from a CERTIFIED FINANCIAL PLANNERTM (CFP®) or a Certified Divorce Financial Analyst (CDFA) to have an objective expert on your side to help you know where you stand, what your needs are and possibly review a divorce agreement offer. And more importantly, hopefully the financial advisor can also help you move forward to accomplish your financial goals and be in a better place all around after your divorce.
One of my first pieces of advice is to protect yourself and plan for the worst before you even get married or are in the fun honeymoon phase. No one gets married expecting to get divorced. I know this sounds overly negative and pessimistic but it is better to be safe than sorry.
Always keep a credit card in your own name. Yes, you may have joint credit cards and joint bank accounts but I highly recommend that you have one credit card that is exclusively yours. Use it occasionally (maybe when buying gifts for your spouse) and always pay it off on time.
You may want an individual bank account in your name but not everyone is comfortable doing this.
Please be aware that if you inherit money or receive large monetary gifts, you want to keep it separate from the joint account. Keep it in your own individual account. This money is yours and does not have to be split or shared in a divorce but it is fair game, or that much more difficult to get back, if it is put into a joint account.
Always stay involved and knowledgeable about your finances. You should know where you stand and how you are doing financially as a couple. I know it may not sound romantic but I highly recommend that you and your spouse have “money dates” to discuss financial topics regularly (maybe weekly or at least monthly) depending on your situation. Money IS one of the most common things couples fight about so start this habit as soon as possible.
If student loans were incurred before you got married you do not have to be responsible for them in the divorce. If they were incurred while you were married then you may have some responsibility for them.
When dividing things in a divorce, be aware that not all assets are equal. Some assets are more liquid than others. Some, like the house may cost more than expected to maintain and / or pay real estate taxes on.
Be aware that not all investment accounts are the same either. Money in a non-Roth retirement account (401k, 403b, IRA, 457) is not the same value as money in a “taxable” account because when money comes out of a retirement account you must pay income taxes on the withdrawal and you may also be paying a penalty if you take the money out too early.
I’m not going to go into too much detail here because it can get complicated. There are many different things to consider and laws vary by state but thought this was worth mentioning without trying to go down the rabbit hole.
I have seen many women who don’t fight for their fair share in a divorce. They just want the unpleasantness to be over so they give in and don’t get what they deserve. This is why you want to be working with an expert that you can trust. But no matter what happens, you want to move forward and know that things can get better financially.
A divorce is a new beginning. Let the past go and make the effort to have the life you want – financially and in the other important and meaningful aspects of your life.
Money is important but PLEASE do not let it be a reason that you stay in a bad relationship!
I am happy to answer any additional questions that you or a friend may have on this topic.
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