Marriage can be tough, but a divorce can be infinitely harder if you aren’t prepared. And if your spouse is the primary wage earner, a divorce could mean huge consequences for your standard of living. In order to limit this — or ideally avoid it altogether — it’s important to take steps to protect yourself throughout the entire process.
Financial communication with your partner should begin before getting married. This will set a precedent that will make it less likely you will get taken advantage of should things go south. Throughout the relationship, know the financial status of your family: incomes, expenses, and assets. Sometimes partners hide assets from their significant other. It’s unfortunate, but it happens. It’s important to track these down and know exactly what’s at stake. If your spouse has a business, these documents may reveal hidden assets.
A divorce could potentially last years, so make sure you’re prepared. Legal fees, court costs, and new living expenses will add up quickly once the process starts, so be sure to schedule it accordingly. If your significant other is due a promotion, bonus, or other influx of capitol, wait until it arrives to start the process. If you have been married almost ten years it may be beneficial to try and wait as you can collect your partner’s Social Security earnings record at that point. Take care of expenses before you decide to separate. Auto care, dentist appointments and clothes for the kids are all costs that will have to be addressed and it’s better to do them before you have all your other legal fees to deal with.
Documents are going to make the process exponentially easier so be sure to have all financial records in order. Copies of tax records, loan applications, wills, trusts, banking information, brokerage statements, property deeds, car registration, etc. should be gathered and organized. Document any assets that are separate since anything that you can prove was gifted to you will stay yours after the divorce.
Talk to a divorce attorney, someone who understands risk around financial management and possible losses. Mark and Kelly Irwin are great go-to people at Irwin & Irwin Law, based out of Fullerton, CA. They will help you review your options. Is it better to take a lump sum or the house? If you want to keep the house, make sure you can afford the mortgage and expenses associated with it. It might be wise to get roommates to offset such expenses. Or you can sell the house and move into something more affordable.
Don’t overlook any assets. Remember, community property laws could determine half of everything is yours. Even if you don’t want certain assets they can be used to trade for something you do want. Don’t forget about the tax implications of each asset and discuss your options with an accountant. Don’t “let the attorneys handle it” as this can cause more headache in litigation later on. Your attorney may have great advice but all the decisions are ultimately up to you.
Remove your emotions from the process. This can be very difficult but is extremely necessary. Make your decisions based on what’s in your best interest long-term, not revenge. A nasty divorce only benefits the attorneys. You may reconcile with your ex, and you may not, but don’t let this determine what you get and what you give up. It’s not about burning bridges or making friends, it’s about securing your future. Therefore, you must prepare for the worst. What if your ex refuses to pay child support? Instead of worrying about worst-case scenarios, face them and take control.
If you are budgeting for the first time, put all your bills in the same place and organize them by due date. If you have more bills than you do income for a pay period, many companies will push back the due date if you call and ask. Always pay bills first and then gas, groceries, and other expenses with what’s left over.
If you are feeling overwhelmed, surround yourself with a network of reliable and knowledgeable people. Get a therapist if you need personal advice that your friends or family can’t help you with. Get a forensic accountant, and/or other financial professional to help you make decisions. Take things one step at a time and utilize the people who are willing to help. You are in control of your situation. The process will eventually be over and once it is, you want to be in the best place, financially, you can possibly be.