Protecting My Finances during Divorce
“Let’s just get this over.” All too often, at least one spouse utters these words during divorce mediation.
Overcome by the emotion, the years of conflict, or the enormity of the life change–they just want to be done.
And that can cost. A lot.
Many people feel the immediate, real emotional pressure of going through divorce far outweighs any potential pressure of uncertain finances. They figure, “I’ll just get through the divorce and figure the money out later.” Only to find themselves in dire straights when later comes.
Property settlements, once entered by the court, cannot be changed by the court. Even after a radical change in circumstances. Careful consideration of financial issues and options as the divorce unfolds can make all the difference.
Three steps help ensure future security.
Create a budget
Create a detailed, real world budget–listing:
- fixed monthly expenses (mortgage, loans, utilities),
- routine required expenses (groceries, clothing, gas, school), and
- known optional expenses (investments, dining out, vacations).
Budgets offer clarity. Hard numbers provide a clear picture of how much you need to make it each month.
This proves invaluable in mediation. Dividing assets can be difficult in the abstract–leading to more confusion and conflict. Detailed budgets generally make the most viable options for reaching objectives very clear. Rather than haggling or battling, most couples recognize how joint resources can be used to make them each financially viable for the future.
Just as helpful, individuals tailor their expectations to reality. When the numbers don’t add up–you are forewarned. That enlightens the other decisions you make during the process, such as:
- whether to ask for the house?
- whether to move for a better job?
- whether to sell an asset for the cash now or keep for security later?
If the numbers work well, you can breathe a sigh of relief.
Consider immediate future needs
As parties move to separate homes–at least one person must re-create individually what they formerly benefited from in their union. Knowing these costs is imperative to creating financial viability and security.
Insurance–People count on a variety of insurance coverages today. Before, one spouse may have provided many of these through their job or the family budget. At least one party will now have to obtain these on their own.
- Health insurance–made far more complicated by the Affordable Care Act–many people have few options for meeting the mandatory requirement for health insurance once coverage through their former spouse’s plan is gone. Consult with health insurance professionals during the mediation to ensure you have a plan in place.
- Life insurance–many divorce agreement provisions are secured through life insurance (i.e. child support and other child related expenses). Consult with providers to discern the options and costs to make informed mediation decisions.
- Home/renters insurance–often simply rolled into the mortgage payment, the cost of this insurance can get lost in budgeting. Whoever is moving needs to include the cost of insuring their new home.
- Auto–parties will need to obtain their own coverage–which might be higher now that discounts for multiple coverages is gone.
A good insurance agent can address all these areas. Though easily lost in the torrent of other activities related to divorce, taking time to gain expert advice makes decision-making easier.
Moving expenses–setting up a new household is expensive. Be sure to consider these costs in discussions.
Credit cards–If credit has been combined, establish new credit cards in individual names before the divorce to ensure availability.
Consult experts to ensure future financial security
Most divorces involve apportioning investments–retirement plans, annuities, stocks. Seek advice from investment counselors or divorce financial planners on how to best use resources to create future financial security for both spouses.
These experts can also create investment vehicles for receiving assets–ensuring the least impact in terms of penalties or taxes while finding the best options for future growth.
“I just want this over!” More expensive words have rarely been uttered. Taking time to think through and plan for the financial repercussions of divorce makes a lifetime of difference.
If you would like help working through all the issues of divorce in a way that promotes security, sanity, and peace–please call 317-344-9740 or email info@TheResolutionCenterIndy.com for a free consultation.