Are you financially prepared for divorce?
Most people going through a divorce already understand that divorce costs you emotionally. However, one of the realities that can add to the stress and challenges is that a divorce may also have a high cost financially. If divorce is something you are considering, it’s essential to ask yourself, am I financially prepared for divorce? If the answer is no—it’s a good time to sit down and plan. Here are some of the things you’ll want consider when thinking about the financial impact of divorce.
Common Financial Impacts of Divorce
Attorney fees can rack up quickly if there is no cooperation. Although there are a lot of feelings flying around, it’s helpful if you go in having a plan for what you want. A qualified professional can help you create a plan that focuses past the frustration and anger. The quicker and more agreeably a divorce proceeds, the less it can cost. Contentious partners can drive the cost of a divorce up, so it is beneficial to come from as calm and agreeable place as possible.
Another thing to be financially prepared for during divorce is that you’ll end up with two households. This means double the rent or mortgage, twice the utilities, and things you may have saved on—like family cell phone plans—are going to cost more. Your standard of living may be affected, especially if one or both parties have to downsize, but if you work together, you’ll have a greater chance of coming to an agreement everybody can live with.
A common money issue in divorce is child support or alimony. These amounts vary and depend on several factors, but are something to consider when looking at whether you’re financially prepared for divorce.
Less Common Financial Impacts of Divorce
While there are common financial impacts, there are also the less common ones. One of these is insurance. You may currently be on health or other insurance with a spouse, and when you are divorced, you’ll need to secure your own health or auto insurance.
If you go through the court system, two sets of experts may be necessary. In collaborative divorce, you can jointly retain one neutral expert. This means accountants, financial advisers, etc. One last cost to consider is travel, educational or extracurricular costs for children. This may not be a factor, or it could be a big sticking point.
Approaching Divorce Collaboratively
A good way to reduce the costs of divorce is to approach it collaboratively. The less time you focus on arguing and spend getting things negotiated, the more you’ll save. That said, being financially prepared helps too, which is why you should plan ahead as well.
You can take a few steps to plan effectively:
Create a new budget – Factor in attorney costs, bills, expenses, and anything that may change during and after the divorce. Using the services of a financial advisor can be beneficial if you need assistance.
Watch your credit – Everything you and your spouse does until the divorce is final impacts each other. Keep an eye on your credit to make sure payments are made and no big purchases enter the picture.
Close joint accounts and open your own – You may want to shut down any accounts you share, and get your own so you can build your credit. If you use collaborative divorce, you’ll reach agreements on the timing of closing and opening accounts so that it’s optimal for you both.
Assess worth and debt – Make a list of your assets and any personal and joint debt. It will give you a place to start from when it’s time for negotiating.
Being prepared financially for a divorce is an ongoing process. Use whatever help you need to get it done, and remember the emotions will pass, and to stay as calm as possible.
Being Financially Prepared for Divorce
Whether you both are discussing this next chapter in your lives or not, you need to consider the new expenses you both will have. Planning and communicating are two of the most effective ways to keep your expenses down and to be financially prepared once the divorce is over. The professionals at BestLegalChoices.com are ready to help you plan for your future.
Brendan J. Kennedy is a partner with the CPA firm of ATLAS CPAs and Advisors PLLC with offices in Arizona, Colorado, Iowa and Illinois.