A divorce can affect not just your emotional state, but it can also have a significant impact on your finances. If you're going through a divorce, you must develop a plan of attack for your finances. We want to be sure all our members have all the knowledge they need to minimize the financial effect of divorce. Below are some areas you can begin focusing your attention.
1. Split Your Real Estate
If you're going to sell your home and property, consider who will be paying the expenses until it's sold. How will you divide the proceeds or debts if you sell the property for less than what you have left to pay on your mortgage?
2. Assess Your Finances
Assess your finances and determine where you need to make changes. Look at your expenses and income and see if you'll have to make a lifestyle change. If you're in the position where the divorce will cause you to lose an extra income every month, you might have to formulate a plan to reduce your monthly expenses, which could include finding a cheaper place to live.
3. Build Your Credit
Divorce could also negatively affect your credit. Therefore, it may be a good idea to begin building your credit history as a single person. Start building your credit by closing or removing yourself from joint accounts, opening solo accounts, and checking your credit report for inaccuracies.
4. Create a New Budget
Once you've figured out which financial changes you need to make, create a budget for yourself. Make a list of your income and expenses and decide what you can and can't live without. However, you must allow yourself some money for fun activities. Divorce is an emotional time for a lot of people, so you'll want to ensure you protect your mental state as well. Be sure to reach out to your support group as often as necessary.
5. Change Beneficiaries
Now’s the time to review your beneficiaries on all of your accounts, including your investment and retirement accounts, and make changes as needed.
6. Set Financial Goals
While married, no doubt, you had some financial goals set, but you must reassess your objectives once divorced and develop some of your own goals. Goals commonly shift, maybe even drastically, after divorce, so you may want to consult with a financial advisor.
7. Negotiate Taxes
In marriage, often one spouse handles the tax returns. Both spouses should have their own joint tax return copies. We suggest our members keep their tax returns for a minimum of five years. You may need your tax records for calculating the cost basis for all assets you decide to keep.
When negotiating a settlement, you must understand the tax implications. If you're filing jointly, one of you will have to file as single and pay a higher tax rate. If you have dependent children, the spouse with custodial parenting rights will probably be the one to benefit from filing as head of household. Tax issues can become complicated, so you may want to seek a financial or tax advisor’s guidance.
8. Revisit Insurance and Benefits
Evaluate your benefits and insurance. Do you require more or less home, car, or life insurance? Will there be any necessary health benefit modifications? One substantial negative consequence of divorce is losing health insurance that was being provided through a spouse's employment.
We’re Here to Help!
While divorce is often difficult, it is a time to reassess your finances and start fresh. We offer many financial options to help you get on a positive path of financial wellness.
Give us a call at 202-479-2270 or email us at firstname.lastname@example.org if you need any help assessing your finances and making financial decisions.