If you’re reading this article, chances are you’re experiencing the emotional, financial, and time-consuming stress of divorce. You’re not alone, either–almost 800,000 divorces are finalized each year in the United States. Couples involved in a divorce can spend up to several years negotiating terms and severing ties. In contested cases, they can spend tens of thousands of dollars along the way.
Regardless of your circumstances, properly planning for a divorce can minimize the time, money, and stress involved in closing out your marriage. That’s why getting back on your feet requires enlisting the right help. By understanding your financial options, you can create a better future.
Here are three ways to financially prepare for your divorce.
1. Inventory Your Assets
First things first. Start by creating a comprehensive list of your assets. As you create your list, note which assets you each had before you got married and which assets you acquired during marriage. Your list of assets should include:
- A home inventory
- Real property, such as real estate and vehicles
- Bank accounts and balances (make sure you know which ones are joint accounts and which ones are individual)
- Investments, including 401(k)s, IRAs, brokerage/taxable accounts, annuities, pensions, and other private equities
- Trusts, inheritances, and other financial assets
Your inventory will help inform your decisions, as you’ll know what will be available to fund your post-divorce life. Insurance policies are also easier to update once you have a big-picture view of your net worth. Your inventory can also help you save time and money in court proceedings. If you have your asset list, you’ll be better prepared when you head into mediation. The better you know what you have, the faster the negotiations will go.
2. Gather Important Documents
The divorce process involves a lot of paperwork, and you’ll have to provide some of it. Gather all your important documents to be prepared. Some of these documents will be required to prove that you have the assets in your inventory. As you gather your documents, you may realize that some of them need to be updated, reprinted, or reordered before you can use them in court.
Here are some documents you will likely need to provide during the divorce process:
- Insurance policies
- Tax returns
- Proof of income
- Social security cards and birth certificates for you and any children involved
- Any prenuptial agreements
- Car titles
- Property deeds
- Bank and credit card statements
- Wills and trusts
3. Work With a Financial Planner
The finances from the divorce have a huge impact on your quality of life, so it’s best to work with a financial planner. Given the complexity of finances and divorce, it is important to understand how a planner can help and to take full advantage of their services. A planner can:
- Clarify your taxes and help you avoid costly tax penalties during your divorce
- Plan post-divorce expenses and create a roadmap to financial security
- Build retirement savings
- Manage debt with built-in arrangements in your divorce agreement
- Save money and stress
Dividing marital assets often involves selling or exchanging ownership of real property and other assets. What too many divorcees forget is that any time such assets change hands, there are tax and income ramifications. Even within the context of divorce, these rules apply.
Financial planners can help you understand what you can expect for different courses of action. They can often identify ways of achieving your desired financial goals, avoiding tax penalties, and saving money on fees.
Plan Post-Divorce Expenses
Financial planners can also assist you in creating a new budget for your post-divorce life based on your actual assets and goals. Work with your planner to create a roadmap of your financial future. Your planner can help you understand what kinds of assets and liabilities you’ll have once the divorce is over. From there, you can create realistic budgets. This is especially important if you have children or other dependents. You’ll want to manage your money in ways that let you maintain the safety, stability, and lifestyle you want for yourself and your family.
Build Retirement Savings
Your golden years can still be enjoyable! Married couples understandably plan for retirement together, but divorce can change the funds you had set aside. Keep your nest egg safe by hiring a financial advisor. Your planner can help you understand how much your retirement fund will realistically be worth, penalties for withdrawing money early, and how to strategically build up savings again. A financial advisor can help you make informed choices on how to build your retirement security so you have peace of mind for your future.
Debt does not go away when you get a divorce. If you and your spouse incurred debt in a shared account, those loans and bills can follow you post-divorce. Contacting a financial advisor can help you make a plan to manage your debt, protect your credit score, and keep financial opportunities open. When handled during a divorce, debt arrangements can be reassigned fairly and written into the agreement, which is far easier than attempting to resolve them after the divorce is final.
Save Yourself the Money and the Stress
Keep yourself financially safe by hiring a financial planner to help you through your divorce. With their expertise handling budgets and debt, planners can make sure that your divorce agreement is fair and sets you up with the best future possible. They can help you save you money by suggesting efficient ways to handle taxes and retirement funds, allowing mediation to proceed much more quickly.
A Financial Advisor Can Help With Your Divorce
Choosing the right financial planner is a critical step in handling your divorce and post-divorce life well. Use our free online matching tool to connect you with the planner you need today. We’ll ask you some questions to understand your situation, then we’ll match you with experts who have the experience you need. Once you’re matched, you’ll get a free consultation so you can get back to independence.