Nothing can truly prepare you for the emotional impact of a divorce. But you can get ready to face the economic effects of this life-changing development. We have seen the mental health benefits of planning for the financial realities of divorce. You will feel more in control of the process when you go into it prepared. Meeting with a financial neutral can also assist you with this transition. Here are five tips for getting ready to absorb the financial impact of divorce.
1. Create a Budget & Balance Sheet
Before you can deal with the impact of divorce, you need a clear picture of your finances. Making a balance sheet that shows your assets and lays out your liabilities and then make budgets that show monthly income and expenses each spouse will have. Both will be used together to let you see where you stand. You can determine how much you have to spend each month as your situation changes, and you begin supporting your own household.
2. Monitor Your Credit Score
Your credit score is one of your most important financial gauges. A high credit score can make it easier to borrow money and help you gain lower interest rates on purchases, which are critical if you plan to buy a home. If you want to rent an apartment, your landlord will often run a credit check.
When you divorce, you must put shared accounts into your own name, such as credit cards. Monitoring your credit score helps you see what you may still share with your soon-to-be-ex spouse and also ensures your ex’s financial decisions do not ding you going forward.
3. Revisit Your Retirement Portfolio
Separating your retirement portfolio from your ex is part of the divorce process. Some couples only have one account or contributor to retirement. You will want an account of your own. Figuring out how much of your shared account belongs to you is also critical. In gray divorces, retirement questions become especially relevant if one or both of you are close to retirement or have already retired.
4. Make Adjustments for When Your Income Needs to Go Further
It is a matter of simple math that divorce stretches your finances. Whereas before your income (and that of your spouse if they worked) supported one household, it now needs to cover two as you will both have mortgage or rent payments and utility bills. While most couples can navigate this change, it represents a big adjustment, and you will need to make changes.
Prioritizing the health of your family amid this switch should also be your focus. You may want to budget for therapy for your children or caregiving for a parent your ex used to look after. Think about ways you can cut back to cover these new expenses or consider new ways to make money to offset the costs.
5. Pursue a Collaborative Divorce
Collaborative divorce offers a less traumatic way to negotiate a divorce settlement. Instead of heading to court, as you do with a traditional divorce, you use advisors and advocates to help you and your soon-to-be-ex cooperatively settle out of court. By working together and prioritizing the needs of your family, you can help everyone come out of the process feeling happy with the outcome and avoiding courtroom confrontations.
Learn More About Collaborative Divorce and Its Financial Benefits
Collaborative divorce provides a smart way to navigate the financial impact of divorce. Collaborative Professionals of Central Pennsylvania specializes in collaborative law and offers financial neutrals and others who can help you. Book a free consultation by reaching out to a member of our Professional Directory today.