If you’re thinking about ending your marriage, you’re likely undergoing a difficult time emotionally. Still, divorce represents both a financial separation and a legal one from your spouse, so you need to take stock of your financial situation before you file. As you’re considering a divorce, make these money moves to protect yourself today.
Get Your Financial Data Organized
Gaining access to important documents and details is generally easier before your spouse knows you want to divorce. The following documents will help you understand where you stand financially with savings and your income and cash outflow. As a bonus, you’ll have your important documents already organized to share with your divorce attorney and mediator as needed.
Here’s a list of some of the documents and information you should gather:
- Any checking and savings account statements
- Statements for retirement accounts, including IRAs, 401(k)s, etc.
- Any brokerage or investment account information
- Loan information, including mortgages, home loans, etc.
- Income tax returns going back at least 3 to 5 years
- Pay stubs from your job
- Details on your healthcare benefits and other insurance. If you’re currently covered under your spouse’s healthcare coverage, you may want to look into obtaining your own coverage
- All the assets and debts you brought into the marriage and those accumulated since you married
Review Your Budget
Sit down and complete a full list of your household’s income and expenses. Then, try to calculate how your income and expenses might change after your divorce. This exercise will give you a good idea of your expenses as a single person and how much income you’ll need to cover them. Making a new budget will also help you decide where you will live. Do you want to stay in your present home, and if so, can you afford it on your own? Or should you find a smaller, more affordable place to live?
You may realize your income may not be enough to support yourself based on your current spending. If that’s the case, try to find ways to trim spending, or even start seeking a higher-paying job. In the near term, you may have to stay with a family member or close friend to save money on housing while you shore up your finances. Creating a post-divorce budget will help you establish your financial needs when negotiating a divorce settlement.
Check Your Credit
Run a credit check on yourself by ordering a credit report and score from each of the three credit rating agencies: Equifax, Experian and TransUnion. These reports will provide you with a view into any debt you hold or any accounts or debt that list you as a joint owner of with your spouse. And by checking your credit score, you can also give yourself time to improve your score if needed before you separate.
If your spouse has handled the bulk of the finances during your marriage, you may have a low credit score or even no credit score. A lack of credit history can make applying and being approved for a car loan, apartment lease or even a mortgage difficult. To build up your score, consider applying for your own credit card, purchasing some items, and promptly paying off the balance to start building your credit history. Also, by applying for credit when you’re still married, you may obtain a higher credit limit based on your combined pre-divorce income.
Don’t Do Anything ‘Sneaky’ With Your Finances
As you consider divorce, your emotions are likely running high, making it tempting to spy on your spouse’s spending or even take steps to damage them financially. But it’s important to resist that urge. So don’t try to access documents you aren’t legally entitled to and don’t hide money with family members or in accounts your spouse is unaware of. During the divorce process, both spouses must disclose their entire financial situation. Once you or your spouse file for divorce, any dishonest money moves you’ve made could be uncovered. These disclosures may trigger financial penalties and sanctions from a court.
Consider Meeting With a Financial Advisor
Getting a complete view of your financial situation can be challenging to piece together on your own. You may want to consider meeting with a financial advisor who can help you gather relevant information and then create a financial plan for your life after divorce. A Certified Divorce Financial Analyst, in particular, who has received specialized training can work as part of the divorce team with your attorney on issues including dividing property and handling tax and retirement plan issues.
Fortify Your Finances Before Divorce
Though divorce is a painful experience, gaining a good grasp of your financial situation and making necessary moves before starting the process can help ease some of the difficulties. In addition, an experienced financial advisor can help guide you through your options and into your new reality.