Going through a divorce is one of the most financially and emotionally stressful life changes you can endure. You’ll want an army of emotional support as well as a good framework with which to approach the financial decisions you’ll be making.
Know that every situation is incredibly unique, and while there are great online resources out there, counsel from a few financial legal professionals is essential, especially when children are involved. Divorce entitlements and processes also vary significantly state by state, so knowing your own local laws and regulations is a must.
1. Assemble Essential Advisors
One of the best starting points in managing your finances through a divorce is assembling your expert financial team. (Even mutually agreed upon divorces benefit from some measure of legal and financial advisory services to assist through the process.) Consider meeting with a CPA for the tax implications of a divorce, or potentially a Certified Divorce Financial Analyst who can assist with questions like how to best structure the split of marital assets.
If a strained financial position is keeping you from seeking legal help, know that there are a number of resources you can turn to. Your local bar association can point you to organizations that offer free services. Other sites like Law Help can also assist you with sourcing forms and professionals in your area that are affordable options.
2. Make a Financial Checklist
As you begin to engage your team of professionals, you’ll need a clear picture of your finances. Consider working off of a pre-established checklist that outlines all of the aspects of your finances you’ll need to resolve through divorce. Using tools like this helps make the process a little more straightforward during an emotional time. Resources like Divorce Netgive you state by state guidance on marital property and a sense of how you might expect assets to be divided.
It’s also wise to put alerts on your historically joint accounts. You might consider adding text or email notifications that tell you if withdrawals or charges over a certain amount occur, which can tip you off to something you’ll need to address with your partner. Separately, be sure that you have login and password information for all shared financial assets — from daily banking accounts to 401k and any investments.
3. Manage Beneficiaries
As a part of your changing financial landscape, you’ll want to go through any policies or benefits portfolios where your spouse was once a beneficiary. This can include life insurance policies or even certain pensions. Update your will and make any changes to legal documents or health insurance forms that include your spouse as an emergency contact or the person who can make medical and financial decisions on your behalf.
4. Get to Know Your Budget
Now is a good time to be meticulous with your monthly budget. If you’re not already using an app or money management tool to track your expenses, start now. Information about your monthly income and routine shared expenses will become essential details in negotiating how you will split marital assets and potentially justify future support requests.
Separately, leverage your financial professionals to talk through the type of expenses you might encounter as you set up your new life. It’s easy to focus on the immediate needs of keeping your current household running, but beginning to plan (and even set aside savings) for the expenses you’ll soon incur on your own is another important consideration.
5. Be Prepared for Spousal Support Issues
Spousal support, especially when there are not children involved, is generally considered to be “rehabilitative.” This means that it’s generally only intended to be a short-term assistance for as long as the supported spouse needs to become a reasonable level of self-sufficient. As women increasingly become the primary breadwinners it’s important to consider that you could be in a position to pay spousal support if you make significantly more than your partner and a divorce dramatically changes their lifestyle. (Again, total income, education, and a number of other state-specific factors come into play here.)
Some legal professionals advise that a way of calculating spousal support is to take up to 40% of the paying spouse’s net income (post-child support), less 50% of the amount of the supported spouse’s net income (if he or she is working). Keeping meticulous track of expenses and total household income will be an important part of working through spousal support requests.
6. Know Your Retirement Rights
Divorce earlier in life can (thankfully) give you more time to recover from any setbacks in retirement savings. While pensions are becoming more rare in the job market, they are almost always considered a joint marital asset that will need to be equitably (read, not equally) divided. Following a divorce, you usually are not entitled to any ongoing distributions from your spouse’s retirement benefits.
If you’ve primarily left investment planning up to your spouse, now is a good time to become educated about the basics of retirement savings.
7. When Exhausted, Rest — Don’t Quit
Divorce wears you out and involves myriad emotional and financial untangling. You will inevitably hit a wall where you are willing to say yes to whatever financial offer or settlement is on the table just to wind down the process.
If you’re looking out for that moment, you can recognize it in advance and take a little break from negotiations instead of barreling through what might not be the best financial decision for you, simply because you want this chapter to be over. Decisions you are working through now have the potential to affect you (and your children’s lives) for a long time. When things get tough (they will), take a break and reconnect with your tribe and advisors to revisit hard financial conversations with a fresh perspective.