A divorce will have serious financial consequences. For starters, simply getting a divorce can cost a bundle if you hire a lawyer to represent you. But unfortunately, that’s often an unavoidable cost.
Be aware that even after the marriage is severed, you will still be responsible for any joint debts. Unless you choose to cohabitate or continue to share the cost of living expenses, you’re also likely to run a separate home. This means if you were paying for a mortgage, insurance, utilities, and other expenses jointly with two incomes, you will now be solely responsible for them. There might also be car payments, credit card debt, and other obligations that you will need to pay for on your own.
These costs add up to increased financial burdens for you. You may have to adjust your goals to fit your new circumstances.
You may have to adjust your goals to fit your new circumstances.
Getting Financial Help
You might be tempted to save money by not turning to a professional (one that charges fees for their help or services). But ultimately, good financial advisers, lawyers, and other professionals often save you money. They can inform you about different approaches to your situation or strategies for getting back on solid financial track once the dust settles."
What You Own, What You Owe
It’s smart to keep track of your finances throughout your marriage. And through a divorce, it’s important to start putting together your own record of where you and your spouse stand financially. Make sure you have copies of:
- Recent tax returns, wills, and salary statements
- Savings, checking, brokerage, and credit card statements, and any other relevant transactions and status reports
- All insurance policies—such as life, homeowner’s, disability, medical, and car
- Retirement plans or accounts, such as a 401(k), IRA, SEP, Keogh, employment pension, or privately held annuity
- Real estate documents, like ownership and occupancy certificates, mortgages, and home equity loans
- Employment benefit plans—stock options, bonuses, insurance, or guaranteed wage increases
- Appraisals and photos of valuables
It’s also smart to know what pension and Social Security benefits you’re entitled to, which may include a portion of your spouse’s benefits.
If you know both your own financial status and your spouse’s, you’re more likely to get a fair deal in your divorce settlement.
Dividing Your Assets
State laws determine much of the process when it comes to sharing possessions and wealth upon divorce. Some states use the rule of equitable distribution. That means the amount you get in your divorce settlement depends on certain factors, such as your salary when you got married, the length of your marriage, your age and your spouse’s age, and the expenses you might have as a custodial parent. It’s quite common that the more affluent partner gets a larger share of the family assets.
If your home is in a community property state, then the law requires a fifty-fifty split of jointly owned property and of everything either of you earned during the marriage. However, there are often major disputes about what was earned, what is owned, and so on. So keeping records and copies of essential information can be valuable to you in a community property state.
Wherever you live, you can save money, and headaches, by trying to work out your divorce settlement outside of the courts with a lawyer present to document and record decisions.
Mediators and Arbitrators
Mediators and arbitrators can also help head off a trip to court. Mediators are facilitators who participate in your negotiations but cannot make decisions. Arbitrators also advise and facilitate, but they are often given the power to enforce a settlement, known as a binding decision, which they may outline themselves.
In conclusion, you can save yourself from further financial woes during a divorce by knowing the intricacies of your financial situation (including assets, debts, cash, and investments).