Preparing Financially For A Divorce

The Importance of Financial Preparation Before Divorce

The median cost of a divorce in the United States is about $7,000, with some complex ones costing more than $100,000. The total cost can be affected by several variables, including the type of process used, where the parties live, and the issues that must be resolved. However, the monetary impact can go much further, so it is important to prepare your finances before you move forward with ending your marriage.

The Financial Impact of Divorce

If you are considering divorce, you might be concerned about the cost of hiring a team to represent you as well as other ones that come with the process. However, the expense of hiring a divorce lawyer is not the only one you must account for. Once you have decided to separate and eventually dissolve your marriage, there will be a period before you file and begin divorce negotiations. During this time, it might be unclear who will be responsible for the bills. As you prepare to file for divorce, one of the things you should plan for is how you will support yourself. This includes figuring out what bills you will need to pay, how much money you will need to cover housing, food, and other necessities, and how you will pay for the actual divorce itself.

Arming Yourself Financially Before the Divorce

While you might be looking at the long-term future, you first need to arm yourself financially for the beginning of the process. If you have marital funds, you must keep careful records if you use any part of these funds after you separate, as you will need to answer for them during the process. Additionally, before the divorce begins you should open a bank account and a credit card in your name only to help you during this period. If you can, you should attempt to build up some individual savings to help you offset the costs that will be incurred. Finally, you should identify all your marital assets and liabilities to prepare for the divorce negotiations.

Identify Your Assets and Liabilities

An important part of the financial preparation before a divorce is to become knowledgeable about your financial status. You should identify all your assets and liabilities and gather related documentation. Understanding your finances will help you create a negotiation plan with your divorce lawyer. Some of the assets and liabilities you should include in your list are:

• Real estate properties and vehicles
• Jewelry, artwork, and expensive furniture
• Savings and investment accounts
• Life insurance and retirement accounts
• Businesses
• Loans and mortgages
• Credit card balances

Gather Documentation

Once you have listed all your assets and liabilities, you should also gather the documentation regarding your financial situation. These documents will be required when you are negotiating your divorce settlement. Some of the information you should collect includes:

• Account numbers, login information, and passwords
• Copy of your mortgage and all property deeds
• Vehicle titles
• Bank statements for savings, checking, and credit cards
• Tax returns for the previous three years
• Paystubs
• Loan statements
• Life insurance policies and beneficiaries
• Pension and retirement account policies
• Appraisals

Protect Your Credit

Protecting your credit profile before and during divorce is important, as you will need your good credit after the divorce is final and you are beginning your single life. However, during this time, with so many other things going on, it might be easy to overlook a bill or fail to pay down credit cards. If you have joint cards with your spouse, you are both liable for the debt, even if only one person was doing the spending. That means that if one of you agrees to pay for the bill and does not, the other will be affected by this failure. Even if you both agree as to which spouse will be paying which credit bill until the divorce negotiations are complete and the divorce is finalized, you should monitor this closely to ensure that no credit card bill goes unpaid. You should also check your credit report so you can see your status and make sure that no other credit line has been forgotten.

Track Your Expenses

Part of your financial preparation for divorce is figuring out what your living costs are and will be. The easiest way to begin this is to track your expenses so you can get a full idea of how much money you will need to have to continue your standard of living after the divorce. This might also help you figure out if you will need to make changes to your lifestyle, even if temporary, as you settle into your new single life. This can help your divorce lawyer during negotiations as well. If you were already keeping track of your budget, you could gather the information easily. If you were not, some of the things you should track include:

• Rent or mortgage payments
• Household expenses, including utilities, maintenance, and repairs
• Food, clothing, and other necessities
• Entertainment and miscellaneous expenses, such as birthday gifts
• Transportation expenses
• Child care and extracurricular activities
• Gym memberships and other interests

Plan for the Future

Tracking your expenses will help you plan, as you can make a realistic budget of what you will be spending. However, for this budget to be complete, you will also need to anticipate other expenses that might not come up month to month. These include vacations, major expenses such as replacing big-ticket appliances, car and home insurance payments, tuition, and after-school activities for the kids. Once you have all this information gathered, you can then create a budget for life post-divorce. During this time, you can also anticipate whether your income will be enough to cover these expenses or if you will have to make changes such as leaving the gym or postponing a vacation until you are at a place financially where you can afford this.

Prioritize Your Retirement

One of the hardest-hit financial areas during divorce is retirement plans. When you are figuring out how to protect your finances before divorce, do not forget to consider how your retirement plans will be impacted and what your plan will be to address this. If you are far from retirement, you might have enough time to recoup your losses and plan appropriately, but if you are older or a gray divorcee, then you will need to be more aggressive about how to protect yourself for retirement, including looking at ways to divide retirement accounts and how best social security benefits might help you.

Finding the Right Attorney

Finding the right attorney is also important in protecting your finances before divorce. At the Law Offices of Kelly Berton Rocco, our team is ready to listen to you and guide you through the divorce process. We know it can be difficult and emotional, but you can count on our commitment to fight for you so you can have the best possible outcome. Call us today at 201-343-0078 to schedule a consultation at our Hackensack, New Jersey office.