Going through a divorce can be a difficult and emotional time. One of the most challenging aspects of divorce is separating your finances from your soon-to-be ex-spouse. This process can be complex and time-consuming, but it’s essential to ensure that you have a secure financial future. In this article, we’ll provide you with ten quick tips to help you separate your finances from your soon-to-be ex-spouse.
- Get professional help: Consider seeking the help of a financial advisor or divorce attorney to help you navigate the financial aspects of your divorce. You might also hire a divorce attorney to help you negotiate a fair settlement with your ex-spouse. You might work with a financial advisor to create a long-term financial plan that takes into account your new financial situation. Your financial advisor should be able to educate you on how a 50/50 split is not the same as an “equally” nor “fairly” split because of different tax treatments and the liquidity nature of different asset classes. For example, $1,000,000 cash is very liquid and will not have any taxable gains, but receiving a $1M house – you will have to also consider the potential taxable gain and liquidity issue when you need to sell the house for any cash needs.
- Open individual bank accounts: Open a bank account in your name only and have your paycheck deposited there. You might consider opening an individual checking account at a bank or credit union and arranging to have your paycheck deposited directly into that account. You may also want to open a savings account in your name only to start building your individual financial identity.
- Close joint accounts: Close any joint accounts you have with your spouse and open individual accounts. This could include joint checking accounts, savings accounts, credit cards, and investment accounts. You might close a joint checking account and open individual accounts at separate banks. This will help you avoid any future liabilities or financial obligations with your ex-spouse.
- Create a budget: Create a budget to help you understand your expenses and determine what you can afford on your own. This could include creating a spreadsheet or using a budgeting app to track your expenses and income. Make a list of all of your monthly expenses, such as rent or mortgage payments, utilities, food, transportation, and entertainment, and compare it to your income to see how much money you have left over each month. You can use spending tracking apps like Mint or these to manage the shares expenses of your children.
- Cancel joint credit cards: Cancel any joint credit cards you have with your spouse to prevent future charges. Contact your credit card company to cancel a joint card and request individual cards for each of you instead. You should also make sure that any automatic payments set up on the joint card are transferred to individual cards.
- Get your credit report: Obtain a copy of your credit report to ensure that there are no joint accounts or loans that you are not aware of. You can request a free credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once per year. You should review your report carefully to make sure that all of the accounts listed are in your name only.
- Update beneficiaries: Review and update any beneficiary designations on retirement accounts, life insurance policies, and other financial accounts. You’ll need to update your retirement account beneficiary designation to remove your ex-spouse and add a new beneficiary.
- Keep records: Keep copies of all financial records, including bank statements, tax returns, and investment statements. For example, you might create a file or folder to store all of your financial documents, including receipts for expenses related to your divorce.
- Be honest: Be honest with yourself and your ex-spouse about your finances. This will help you avoid any future financial disputes and ensure a smoother divorce process. For example, you might disclose all of your assets and liabilities to your ex-spouse during the divorce process to avoid any surprises later on. you can use online storage space like box.com or Goodl Drive to stay organized with your documents and files.
- Consider a prenuptial agreement: If you are planning to remarry, consider getting a prenuptial agreement to protect your assets in case of a future divorce. For example, you might consult with a family law attorney to create a prenuptial agreement that outlines how assets will be divided in the event of a divorce.
Divorce is a stressful and challenging process, but by following these ten quick tips, you can help ensure that your financial future remains secure. Remember to open individual bank accounts, close joint accounts, create a budget, cancel joint credit cards, obtain a copy of your credit report, consider a prenuptial agreement, update beneficiaries, seek professional help, keep records, and be honest with yourself and your ex-spouse about your finances. By taking these steps, you can protect your financial well-being and move forward with confidence.