Getting Back on Solid Financial Ground After a Divorce
It's no secret that a divorce can wreak havoc on your finances. That's true whether the divorce was contentious or amicable. Even if you had a prenuptial agreement, you are still separating households, dividing assets and liabilities, and incurring the necessary expenses that come with the divorce process itself.
Following these tips and recommendations can help you regain your financial footing after your divorce decree has been issued
1. Create a Budget for Your Post-Divorce Life
While you may not have used a budget before your divorce, you should create one for the months and even years after your divorce. Your new budget should include changes to your monthly housing expenses if you have moved, changes to income if you were a two-income household or if you will be receiving spousal support or child support as part of the divorce, changes to insurance payments, and more.
Once you have identified your monthly income and expenditures, you can determine how much you are able to set aside in savings, whether you need to make changes to your monthly spending, or whether you need to find ways to increase your monthly income to meet your obligations.
2. Don't Make Impulse Purchases
Divorces can be stressful and emotional for everyone involved. When you are under stress, your ability to make rational decisions may be impaired. Keep that in mind, and hold off on making impulsive financial decisions for at least six months after your divorce has been finalized. If you find yourself tempted to quit your job, buy an expensive car or move into a larger home, recognize that these types of decisions could come with long-lasting financial consequences that you may end up regretting.
After six months have passed, you should be starting to get used to the status quo and will be able to make more thoughtful decisions about your finances.
3. Sever Joint Accounts and Joint Debts
While the divorce process should have formalized your agreement with your spouse on how assets and liabilities were to be divided, make sure you follow through by severing and closing joint financial accounts, and closing joint credit cards or loans. If your ex-spouse's name is still on your credit card account and he/she runs up more debt on the account after the divorce, you are legally responsible for that debt.
Work with your ex-spouse to make sure you've adjusted account ownership to mirror what you agreed on in the divorce.
4. Change Your Beneficiary Designations
After your divorce, you will need to make changes to your beneficiary designations on life insurance, annuities, investments and retirement accounts to reflect the changed circumstances. Your divorce does not automatically invalidate beneficiary designations naming your spouse, so this step is critical to make sure your assets and insurance proceeds do not end up in your ex-spouse's hands. The only exception to this is a situation where your divorce decree requires you to name your ex-spouse on a certain policy or account to secure child support or spousal support obligations.
Regaining Your Financial Footing
While things may seem rocky now, it is possible to get back on solid financial footing after a divorce. Your divorce attorney plays an integral role in helping protect your financial interests and wellbeing during the divorce and can be a valuable resource as you look toward the next chapter of your life.
Whether you are considering a legal separation or a divorce, it is important to have an experienced, knowledgeable family law attorney by your side who can advocate on your behalf. To learn more and to schedule a free consultation, contact us online today, or call 619-866-3756.
The information and materials on this blog are provided for general informational or educational purposes only and are not intended to be legal advice. Being general in nature, the information and materials provided do not apply to any specific factual or legal circumstances. No attorney-client relationship is formed with any attorney employed by Sachdev Legal Group, APC nor should any such relationship be implied by the information provided or by any comments posted. The information provided is not a substitute for the advice of an attorney licensed in your jurisdiction. If you require legal advice, please consult with a competent attorney licensed to practice in your jurisdiction. Past performance does not guarantee future results.