As most of us are eager to start the new year and start working toward our new year resolutions, January is unfortunately also the month that typically sees as much as a 30 percent surge in divorce filings. While finances may play a big part of the negotiating process at the end of a divorce, paying close attention to finances at the very beginning should be a priority. From my own experience with clients, it’s likely you’ll want to bury your head in the sand and avoid dealing with any of your financial issues; but keep your head up. Divorce is not ideal for any marriage, but here are some ways to help you get financially on track if it does occur.
Current and Future Budget: First, find a trusted financial advisor who you believe has your best interests in mind. An advisor can help you manage your assets, assist you with making educated financial decisions and hold you accountable to your long-term planning. Work with that advisor to put together a financial plan and a budget that will reflect both your current and future financial situations. It’s important to understand how much is needed to live on each month, what monies are needed for the future and how much to save for retirement and other goals moving forward.
Costs of Caring for Children: If children are involved in the divorce process, there are many more costs to take into account such as annual summer camp fees, college education or future wedding expenses. These expenses can add up quickly. When working with clients going through a divorce, one of the most overlooked potential costs is dependent care. If you have been out of the workforce and will need to return to work due to your divorce, make sure to plan for these additional costs.
Your Home: If you plan to stay in the family home, be aware of the hidden costs to homeownership that can become overwhelming on a single income budget. Be sure that your home is affordable if you are planning to stay in it. You don’t want to be house rich and cash poor. After the divorce, you may need to re-title the property into your name only.
Review your documents: It’s important to gather and review all your estate planning documents because it is imperative that you change these documents after your divorce to reflect who will have new designated roles. This includes who will be your executor, trustee and power of attorney (for your financial and medical directives). You will also want to look at changing beneficiaries of your IRAs, 401(k)s, 403(b)s or annuities. You may need to change the ownership of bank and brokerage accounts. If a life insurance policy is needed or required on an ex-spouse in order to cover future alimony or child support, consider being the owner of the policy with the ex-spouse as the insured so you control the policy.
Keep Organized: Keep updated personal information in one place. A Family Records Organizer can provide timely, vital information to your family and professional advisors if an emergency should happen. This organizer would typically include things like passwords to online accounts (e.g. passwords to social media sites), financial plans, financial statements, retirement benefits, tax returns, liabilities, legal documents, insurance policies, real estate documents, government benefits, and health/medical information. If your ex-spouse had access to your usernames and passwords, you will want to modify that as well.
Aside from financial considerations, divorce is also an emotional time. Do something good for yourself, whether it be returning to school for an education or seeing a nutritional expert, personal trainer or life coach. Once a bit of time has passed, resolve to look forward to the new life ahead of you with hope and determination.
Lisa Taranto Schiffer
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