Divorce can be a stressful and often expensive process. In addition to the financial cost of divorce proceedings, research shows that divorced spouses need about a 30% increase in their income to maintain the standard of living they had when they were married. If you're considering filing for divorce, here are some steps that will go a long way in helping you prepare financially.
Track Your Expenses
One of the first places to start financial preparation before filing for divorce is to track your expenses. Doing so paves the way for developing a budget to live by during and after your divorce. A budget will also provide your divorce attorney with insight that can help determine how to divide your assets.
Track monthly bills, debts, and income to give yourself a thorough picture of your financial situation heading into divorce. Often, couples don't realize how much money goes into running their household until they begin detailed expense tracking.
Cut Back Where Possible
Most couples benefit from budgeting heading into divorce. After you have a clear idea of how much you spend each month you can go through your list carefully and eliminate unnecessary expenses.
How much you trim down depends on your specific financial situation heading into divorce. Some couples cut back on luxury expenses, while others trim down to the essentials. It's wise to go through each line item and determine whether or not you can comfortably do without each particular expense.
Some of the best places to start trimming include spa visits, country club memberships, tennis lessons and cable television bundles. Get rid of unnecessary expenses and slightly change your lifestyle to adjust to a more manageable budget going into your divorce. Budgeting before your divorce will help relieve a lot of the financial pressure that comes with the process.
Put Major Financial Decisions on Hold
If you're considering purchasing a new car or changing your life insurance policy, then you should wait. Any major financial decisions that you make right before your divorce can have an impact on the proceedings, make your divorce more complicated, and even create more strife between you and your spouse.
If you own a business, separately or with your spouse, hold off on making any big changes that will affect your business finances. One of the major aspects of divorce is dividing marital assets. Acquiring new assets or making changes to current assets can affect your divorce proceedings.
Your assets include personal property. So avoid making major personal purchases, including furs, coins, boats and collectibles. Also, avoid making any major investments or changing stock portfolios.
Consider Meeting with a Divorce Financial Planner
Even if you have everything under control, you may benefit from meeting with someone who specializes in divorce financial planning. A certified divorce financial analyst (CDFA) can not only help you plan but also advise you on complicated financial aspects of your divorce.
A CDFA does not take the place of a divorce attorney but works with you to set a practical financial outlook that will help you avoid suffering financial hardship during and following your divorce. A CDFA will analyze your income and assets make recommendations on independent financial planning.
Avoid Taking on New Debt
Debt, like assets, is divided during divorce. Spouses moving toward divorce shouldn't open new credit cards, or take out new loans. You're both responsible for any debt you acquire during the marriage. In other words, if one person takes on new debt while they are still married, then their spouse will also be responsible for it.
Divorce is a life-altering, complex and challenging event. It is important to be aware of how your financial decisions can affect your divorce during the proceedings, as well as before they start. If you are going through a divorce, you should not only consult with a CDFA but also a divorce lawyer who can guide you through the other aspects of your case.