How to Protect Yourself Financially When Getting a Divorce
Even if you’re happy to part ways with your partner, divorce sucks. Divorce is not only costly in the short-run, but it can have a long-term financial impact if you're not careful. Focus on the fundamentals to stay on track.
With any divorce often comes emotionally-charged negotiations and the inevitable splitting of assets. From a financial perspective, it can be hard to remain objective and advocate clearly for yourself under such stressful and upsetting circumstances. Yet, what is decided in a divorce settlement lays the foundation for the new chapter you will begin after everything is said and done, signed, and filed.
During a divorce, you’ll be faced with many decisions that may affect your financial security.
Too often women underestimate just how complex these issues can be and how important it is to make the right choices. Your best plan of action is to be informed, take your time, think practically instead of emotionally, and consider the future when getting your divorce finances all in a line.
Settle out of court.
Use a mediator if at all possible. It requires talking with your ex and coming to an agreement on the terms of the divorce. Mediation is typically less stressful and less expensive than a divorce trial, and it usually proceeds much faster. This is called an uncontested divorce.Failing to Stand Up For Yourself
Money is one of the last taboo topics in our country. Going through a divorce means you’re going to be talking about money a lot. Sometimes, when you feel overwhelmed during proceedings or negotiations, it can be easy to fall back and not speak up for what’s in your best interest.
This is a huge mistake!
Don’t “go with the flow” if the conversations aren’t in your favor/best interest, or if they’re not taking your wellbeing (or the wellbeing of your kids) into account. Now is the time to get vocal about what you need. If you’re uncertain how to navigate these conversations, your lawyer can help.
Budget carefully and honestly
Doing some hands-on budget cash flow analysis will give you a sense of control over your finances. So before your divorce, find out how much cash you have on hand, in savings, invested and tied up in equity. Don’t forget to account for recurring expenses that you once split with your partner. Pay attention to big-ticket expenses like health insurance, cars, school fees and others. Gather all of the paperwork you have, and make copies.
Cancel joint accounts.
If you haven’t already, cancel and close all joint accounts with your ex-spouse. Joint accounts that remain open are liabilities that could come back to haunt you. The last thing you need is to be on the hook after your ex-spouse runs up charges on credit cards or overdrafts a bank account. Close these accounts immediately. If you currently have a balance on the account that cannot be paid off (for example a credit card), instruct the card that you want to suspend the account and not allow any future charges. Confirm that the account cannot be re-opened or unsuspended. Even with a verbal agreement to pay don't keep the joint accounts because if your partner ghosts you, you’ll be left to pay the balance.Create A Plan
Getting a thorough and accurate understanding of what you’re entitled to requires going through all of your assets — line by line.
Do some soul searching to identify two or three key financial matters to help focus negotiations. For example, do you want the children’s school fees paid for by your spouse? Do you want the family home? To make the best of a bad situation, come to the table with a clear idea of the things that are most valuable to you.
Remember, you probably won't come out of this with everything you hope to keep, so prioritise what's most important to you, be fair about it, and choose your battles selectively. Accept that your standard of living is likely to change. While you won't necessarily be starting from scratch, you will be starting over.
Ensure Your Income Will ContinueKeeping up a home on a single-income could set you up for financial hardship even if you feel there are short-term benefits such as maintaining stability for kids or yourself. You may want to downsize now in order to be able to save more for any unanticipated expenses that could come up because of the separation or divorce and being a single income household. Keep in mind, a home comes with an outstanding mortgage payment (most likely), as well as all the ongoing costs to maintain the home like taxes, insurances, and anything that requires fixing.
Include as much information as you can about future considerations and situations that may come up in your separation agreement. Have a plan for each item to avoid having to go back to court or spending money on more legal fees.
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