Filing for divorce begins a process of change and transformation in every aspect of your life. Even if you are the one who wants a divorce, the prospect of those changes can be daunting. If you are considering filing for divorce from your spouse, you may feel overwhelmed when you start thinking through all the consequences of that decision. Because divorce is, in many ways, a severing of legal and financial ties, many of the changes that occur as a result of divorce carry a financial element.
In this blog, we will discuss 5 steps that will help you prepare financial for divorce:
#1. Take Inventory of Your Current Financial Situation
By taking stock of your current finances, you will have a better sense of your needs moving forward. Accounting for the state of you and your spouse’s current financial situation can drastically reduce the uncertainty and stress that are often part and parcel to the divorce process. To create a useful inventory of your current finances, you will want to:
- Make a list of all your assets, including real estate, furniture, jewelry, heirlooms, etc.
- Make note of any assets that you consider to be separate property
- Take photos of valuable items & copy any insurance policies
- Make a list of all your debts
- Make a list of any items that carry sentimental rather than economic value to you
#2. Organize Your Financial Documents
Go through all your files and make copies of your financial records, including:
- Tax returns
- Pay stubs
- Bank statements
- Retirement accounts
- Investment accounts
- Life insurance polices
- Employee benefit handbooks
- Mortgage documents
- Credit card statements
- Social Security statements
- Automobile titles
- Business documents, especially if you or your spouse is self-employed
It’s important that you keep these documents organized and secure. Consider storing these financial records outside of your marital home, perhaps with a relative or trusted friend.
#3. Make a Budget
After inventorying your current assets and debts and organizing your financial documents, you will want to get a sense of you and your spouse’s current income and expenses. If you don’t know exactly how much your spouse earns, this is the time to find out. If you have children, you should begin to get a sense for how much you and your spouse are currently spending toward their care.
Tracking your income and expenses now is especially important if you haven’t had much involvement in keeping track of your family’s budget. Doing so will not only help you begin to outline a practical post-divorce budget, but it will help you and your attorney get a sense of what should be prioritized during divorce settlement negotiations, which may or may not include spousal and/or child support.
Once you have a good sense of your current income and expenses, you should be in a good place to start planning for your post-divorce life. First, you’ll need to create a working budget. That will mean projecting both your future income and future expenses.
For some, this will be an easier task than for others. If you have been out of the workforce in order to devote yourself to raising your children, for instance, you might need to begin getting a sense of your earning potential.
These calculations don’t need to be hard and fast; they can and will shift as you move through and past the divorce process. Having a rough budget will help you make informed decisions as you move through the process rather than feeling totally at sea.
#4. Consider if You Need a Financial Fallback Plan
Especially if you are financially dependent on your spouse, you may need to have some kind of financial fallback plan in case your spouse decides to cut you off. While few anticipate this happening, some spouses can become spiteful during a divorce. Although a skilled divorce attorney can help you regain access to those funds, it will likely take time to do so. It is therefore wise to have access to funds in reserve to provide financial security if something of this nature occurs.
There are different ways to go about this. If possible, you can build an emergency fund. Typically, financial advisors recommend that you build a fund equal to three months of living expenses, but any amount of savings can be helpful. Having access to liquid funds can provide financial stability during this difficult time and help with any costs associated with court fees or attorney fees during the divorce process.
It is important to remember, however, that even if you create a separate account to hold these funds, if it was built using funds that were earned during the marriage, these funds are likely to be considered marital property and therefore subject to equitable distribution during the divorce. Nevertheless, having access to a financial safety net may outweigh this concern.
Another possibility is to have access to credit. Opening your own credit card accounts is especially important if you have only had access to joint credit card accounts, as your spouse could remove you from those accounts during the divorce. You will also want to begin building your own independent credit for your post-divorce life.
Finally, you might want to assess if you have friends or family that may be willing to help float you if worse comes to worst. Divorce can be scary, especially if you are financially dependent on your spouse, and having a set of contingency plans in place can help you feel more confident about the path forward.
#5. Meet with an Attorney
Whether you are hoping to end your marriage amicably or you anticipate a contentious divorce, working with a compassionate and knowledgeable divorce attorney can help provide you with much-needed clarity during an otherwise uncertain time. The divorce process can be complicated and confusing at times, and reliable legal counsel can be invaluable.
At K. Dean Kantaras, P.A., we are committed to helping our clients through this difficult time in their lives so that they can move forward in a positive way. If you are considering filing for divorce, contact us online or call us at (727) 939-6113 to schedule a consultation.