Getting a divorce can seem overwhelming. If you’re like most people, you’ll experience a number of negative emotions, such as anger and resentment. You’ll also deal with stress over money. After all, you’ll need money to pay rent (or a mortgage), pay your monthly bills, save for emergencies, and build your retirement fund.
Even if you are the primary breadwinner, ending your marriage can create financial difficulties. You may suddenly need to support two households. Or you might need to make alimony and child support payments to your ex. If you stayed home while your spouse worked, your financial situation may be even more precarious.
Money is one of the main areas of anxiety among individuals seeking a divorce. Many people worry that they’ll be unable to find their financial footing once their marriages end. This article will describe 6 things to do to help get your post-divorce finances on the right track.
#1 – Check Your Credit Report
It’s difficult to become financially stable when you’re saddled with poor credit. So get a copy of your credit report and determine your current standing.
First, look for errors. Take steps to resolve the ones you find.
Second, identify any accounts that are past due. Bring them current.
Third, start building your own credit history. If the only history you have is linked to the joint accounts that you share with your spouse, apply for one or two credit cards in your own name. Use them and pay the balance in full each month.
#2 – Gather All Financial Documents
Gather your bank statements, credit card bills, tax returns, mortgage statements, and pay stubs from the last few years. Include statements for accounts that you share with your spouse. Make copies and store them in a place where they’ll be easily accessible.
Include copies of your will, your spouse’s will, insurance policies, and statements from your investment accounts. Also, copy all documents showing ownership of your home, cars, rental properties, and other assets.
You may need to refer to the above documents during your divorce settlement negotiations. It’s far better to have them and not need them than to need them and not have them.
#3 – Change Your Passwords
A lot of married couples share their online passwords with each other. The passwords may provide access to each other’s email accounts, cell phone accounts, and online banking accounts. That freedom of access is a bad idea when divorce looms.
It is imperative that you make your accounts private if you suspect your marriage is about to end. The easiest way to do that is to change your passwords. In addition, call your bank and credit card issuers and instruct them to withhold information about your accounts from anyone who might ask for it.
#4 – Update Your Accounts
One of the first items to address when seeking a divorce is to make sure the accounts on which your name appears are updated. For example, close joint bank accounts and credit card accounts that list you and your spouse as authorized users. (Open individual accounts in your own name.)
Call your auto insurer if your current policy lists your spouse. Remove your name from the policy and establish a new one for yourself.
Contact your mortgage lender. If you and your spouse decide against selling your home, make sure the mortgage is solely in your name or the name of your spouse. Because lenders are loath to remove borrowers from existing loans, you’ll likely need to refinance the mortgage. The sooner you do so, the better.
#5 – Learn About Retirement Planning
It’s never too early to start learning about retirement planning. Educate yourself on matters like how to invest, the types of insurance to buy (and how much), and the nuances of various tax-deferred investment vehicles.
You don’t need to become a financial expert. You just need to be familiar with the basics of saving for retirement. That includes learning how investments grow and the tax consequences of liquidating assets in your portfolio.
Don’t worry. It’s less daunting than it sounds. If you need help, your divorce attorney should be able to point you in the right direction.
#6 – Start Putting Away Money
Start building your savings fund as soon as possible. It’s tempting to wait, especially if you’re struggling to pay your monthly bills. But the longer you wait to save money, the more likely you’ll continue to do so. Plus, the longer you wait, the less cash you’ll be able to put away.
You’ll find that saving money is in itself a motivating driver to save more. Watching your account grow is deeply satisfying. It will give you peace of mind that you’ll have the funds available to address emergencies if (or when) they occur.
Get a head start on putting your post-divorce finances in order. It takes effort and more than a little discipline. But you’ll look back years from now and be glad you took the necessary steps.