There’s no question that divorce brings a whole host of questions and uncertainty. As financial planners we get asked what some of the best things do to prepare are. For those dealing with the imminent reality of parting with a spouse, here are three strategies to help you get real about the situation.
Admit What You Don’t Know
When it comes to family finances, what’s your role? Do you handle the bill paying or manage the bank accounts? Do you have an idea of what the brokerage account and retirement plan balances are? Or are you in the dark? If you’re in the dark, you need someone to turn the lights on quickly! Sometimes in cooperative situations you can ask your spouse for account statements and tax returns. Understanding the family cash flows and the attributes of different types of accounts (retirement plans, IRAs, brokerage, 529 plans etc) will be a tremendous asset to you. It is our goal as planners to help you make more informed financial decisions both within the divorce process, and for your long term future as well.
Think About Your Future
Potentially this will be hard at first. But it’s important to think about what the next phase of your life is going to look like. In speaking with clients they often comment about what they “thought” their life would look like, and the reality is that things will be different going forward, but if we can step back and take more of an objective look, sometimes it can be fun! Because you’re now starting with a clean slate. The world is yours and we can let our imaginations run wild. Where did you dream of traveling to, but never got the chance? Is it time to go back to school? Can we find business pursuits in the things you feel most passionately about? Whatever it is, those dreams become goals, and the goals need to be funded with money, so your financial picture needs to remain front and center.
Build a Single Identity
This one is important. Often times during the marriage all of the credit cards, mortgages, loans, etc. are held in the name of both spouses. All of these joint accounts will either need to be closed or converted. Once the marriage is over you may find that your credit picture is not as strong as it once was, but there are some things that you can do while you’re still married and in transition. Immediately open a checking and savings account in your own name to begin the process of establishing your own identity. Next, it’s a good idea to find a low, or no annual fee credit card to apply for in your name only. You might even be able to find one that offers 0% interest for a period of time. Don’t go on a shopping binge or take the first plane to Puerto Vallarta though! The purpose is to establish a credit history. If you carry a small balance ($1,000 or less), and pay it off consistently it creates a credit history that you can then use for larger needs later. It also gives you access to credit post-divorce and maybe even during, if legal fees are necessary.
These steps may seem small, but they are necessary first steps to get you thinking more independently about your financial future. With some simple planning, and help from your trusted advisor, you can really put yourself in a better place to get through a difficult time.
Second Saturday offers non-biased financial, emotional and legal information from qualified local professionals, providing people with the knowledge, support, resources and trust that they need to survive the divorce process and move forward with confidence toward a new life.
Workshops are every second Saturday of the month from 9am-12pm- registration at 8:45am.