Nothing wreaks quite the havoc on one’s life like a divorce… as if the emotional turmoil of a divorce isn’t enough; divorce causes a complete upheaval in your finances. The unavoidable impact of divorce on your finances is considerable. The income your family brought in as a unit is now split and has to run two households. Problems with post divorce finances happen because people are not financially organized and are unaware of what to do to manage them. Here are a few tips and techniques on how to manage your finances during and after a divorce.
1. Consult a financial adviser
This is a pre-emptive measure that is something that should be done the moment you feel your marriage is heading towards irreconcilable differences. A professional financial advisor will assist you in assessing what your assets and liabilities are. You should generate a statement of net-worth to separate and identify individual and marital assets, in addition to your collective debt. Consider freezing your brokerage accounts, and any home equity lines of credit.
While assessing your wealth, you should include income anticipated from stock dividends, rental property, or any joint business venture. You should also make preparations for the future by saving some cash to have on hand for any emergency that may arise during the separation.
2. Safeguard your credit standing
During divorce you should separate your finances the first chance you get. You should terminate any joint bank and credit card accounts. Opening new accounts in your own name will protect you. Reviewing your financials in terms of joint accounts and credit cards will protect you from damaging your credit in case your ex is not financially responsible.
3. Set up a new budget
One of the major financial consequences of divorce is the sudden decrease in income. As such you will need to review your finances and determine how to allocate your income. You should figure out what your new income and expenses are. If there are kids involved, you should evaluate their needs and costs to make sure the children are financially protected.
4. Determine child support in clear terms
To ensure that your children’s lifestyles do not suffer because of a divorce, parents should clearly and explicitly negotiate the terms of their expenses and child support. Although each state has its own procedures and norms, child support amounts can be adjusted at the discretion of the judge if a certain criterion is met. To get an idea of how much you will need to spend on the children, analyze what you’re spending on your kids for everything, and be it clothes, school, groceries, dining, transport, or the fees for any extracurricular activities.
5. Get family insurance
Lastly, you must take out an insurance policy for the person paying child support. The policy should also contain disability insurance for added security. Lastly, you must determine which parent would be responsible for medical expenses out-of-pocket and how you will reimburse each other when needed.