If you’re getting a divorce, you need to protect your money. These eight tips for protecting your financial health during a divorce will help you determine your assets and liabilities, and encourage you to focus on your financial future.
For more in-depth financial advice for divorcing couples, read The Complete Guide to Protecting Your Financial Security When Getting a Divorce by Alan Feigenbaum and Heather Linton. These divorce planning experts will teach you how to construct a solid financial action plan when divorce seems imminent, get a complete picture of family finances, including the low down on a spouse’s small business or intellectual assets, and negotiate a win-win financial settlement. You’ll also learn how to choose the best settlement method, from options including mediated, arbitrated, and collaborative agreements, and avoid tax penalties and pitfalls and deal with retirement nest egg, 401(k), and SSI issues.
Read 13 Ways to Get Money to Leave Your Husband if you’re in the “thinking about divorce” mode. Even if you end up staying with your husband, you could always use extra money, right?
“Ah, yes, divorce…from the Latin word meaning to rip out a man’s genitals through his wallet.” ~ Robin Williams. Ouch – and many husbands and wives would agree that divorce destroys a family’s personal finances and retirement plans.
According to the experts at Bills.com, one million Americans divorce every year. More than 80% of divorcing couples cite “debt and financial distress” as the primary reason their love relationship failed, according to an American Bar Association survey. Research shows that most families suffer a financial decline following a divorce.
And, here are money tips for divorcing couples from the experts at Bills.com…
How to Protect Your Money When You’re Getting Divorced
Protecting your money while getting a divorce isn’t something to feel guilty about. It’s a something you need to do, especially if you have children or financial debt because of your marriage.
Assess your debts and liabilities with a credit report
First, you need to see yourself as your creditors do. Online (go to MyFico) or by phone, you can request a “tri-merge” credit report (a summary from all three major credit reporting bureaus). Make a note all of your existing shared and individual liabilities. Settle (or get a judgment) on how you’ll allocate these responsibilities.
Plan how to handle your home mortgage loan
If you own a home, the mortgage is likely your most significant monthly payment. Be certain you understand how you’ll resolve monthly mortgage payments, and how you’ll divide the home’s value – whether one partner buys out the other now, or the home is to be sold after children are grown. If you’re getting a divorce, you need to protect your money by thinking long-term.
Budget for bill payments, loan payments, credit card debt, etc.
Create a detailed budget, based on your new income level, and use free cash flow to pay off debts. Most people find the most efficient way to pay off debts is to first pay off smaller bills – starting with under $100 – then pay off loans and unsecured debt, such as credit cards. An effective way to reduce debt is to pay off the debt that has the highest interest rate first.
Make sure your ex is making his or her payments
If possible, make provisions in the divorce agreement for reporting on resolution of significant debt. There are important implications for you personally if your spouse does not meet his/her end of the bargain on liabilities allocated through the divorce proceedings.
For more tips on protecting your money when you’re getting divorced, read How to Deal With Financial Debt When You Get a Divorce.
Call all creditors for shared accounts
Close the accounts (credit cards, gas cards, department store cards, phone cards, etc.) if you are not carrying balances, or remove your name from jointly held accounts.
Remember that for jointly held credit cards, and for any other debts incurred during the marriage in community property states, you have shared liability – and thereby share any potential negative credit rating impact. This means that if your ex-husband or ex-wife doesn’t make payments after the divorce, it could come back to haunt you – and your credit rating. Protect your money when you’re getting divorced by making the extra effort.
Think about back taxes after divorce
If you owe back taxes, be aware that the IRS does not have to honor a decision from a divorce judgment. This tip for protecting your money for divorcing couples may involve consulting a tax expert to help with your divorce tax planning.
Focus on rehabilitating your credit and financial health
Getting a divorce isn’t just about letting go of someone you love — it’s about rebuilding financially with a savings plan. Reinvest any proceeds or equity that come out of the divorce proceeding, and be especially cognizant of building yourself a retirement fund for the future. You may need to start over.
Consider hiring a debt resolution firm
If you find yourself in financial trouble because of the divorce, seek help immediately from a reliable, professional debt resolution firm. Be sure to investigate the company you choose to assist you, and seek out a company that operates for the consumer, which is markedly different from credit counseling, debt consolidation, and debt management firms.
Who will you be after the divorce? Read How to Change Back to Your Maiden Name After a Divorce.
I welcome your thoughts on how to protect your money while getting a divorce, but I can’t offer advice or counseling.
Bills.com is a free one-stop portal where consumers can educate themselves about complex personal finance issues including credit cards, debt relief assistance, insurance, mortgages, and other loans.