Unfortunately, not every marriage is built to withstand the challenges of life or the constant compromise of partnership. That’s why roughly 41 percent of first-time marriages end in divorce. And it’s not necessarily better the second or third time around—with divorce rates for subsequent unions rising to 60 percent and 73 percent, respectively.
Divorce is a practical reality and once you’ve come to the decision that your marriage has reached the end if its road, you need to take the important step of preparing your personal finances for the divorce and the life you have beyond it.
- Start saving money. Divorce itself is costly. During the process, you both still need to keep up with all your pre-divorce financial responsibilities while also embracing new ones as you move into separate living spaces. That makes it important to immediately reduce your spending and start saving cash. Talk to your soon-to-be ex about how you plan on splitting the bills so that you can determine where cuts are to be made. Be sure to get any agreement in writing.
- Separate your finances. Most married couples contribute their paychecks to a joint account. When a divorce is imminent, you should open an independent account and begin having your income redirected there so that you have an independent source that your spouse can’t access. Talk to a lawyer about how much you are entitled to withdraw from your joint account.
- Open new credit cards and close old ones. Joint credit cards are dangerous territory during a divorce. Close any joint accounts you have so that your spouse can’t add any more joint debt to the situation—but be sure to open individual accounts for yourself first.
- Create a post-divorce budget. Binge spending is not unexpected after a divorce. You might buy too much for the kids and yourself in an effort to ease the pain. Having a budget will help you avoid overspending and will allow you to better handle your new financial situation as a single wage earner.
- Update your will and beneficiaries. Once you move toward divorce, you may not want your spouse to be the beneficiary of your retirement plan or life insurance policy, so make sure to update those and any other beneficiary designations you have. You also have a new set of individual assets and need to revise your will and trust.
Divorce is difficult emotionally, so it’s always a good idea to have a team of professionals dedicated to protecting your financial future. At Kramer Wealth Managers, we can help you make important financial decisions that help see you through the divorce and beyond.
This material is intended for informational purposes only and should only be relied upon when coordinated with individual professional advice. Neither Osaic Wealth, nor its registered representatives, provide tax or legal advice.
