For most people, separation and divorce process is an emotional roller coaster that affects every aspect of their lives. It’s easy to feel out of control when so many circumstances are thrown into a state of uncertainty. But there are ways a person can prepare for divorce that will alleviate the uncertainty and save you both money and time.
Here are the five strategies to assert control over your financial situation when facing separation or divorce:
1. Get organized
This seems such a simple strategy that it may appear redundant, however the uncertainty and fear that surfaces when facing separation can be downright paralyzing for many people. That’s why it’s necessary to adapt an “organized” frame of mind early in the process. Give yourself permission to “turn off” emotions periodically to focus on what needs to be done to facilitate the separation and move forward. Any delay in providing necessary disclosure and acquiring a clear understanding of your financial understand will likely translate to more money spent on legal fees, and a deepened sense of uncertainty and fear.
2. Document Hunt
You will need to gather a significant amount of documentation related to your bank accounts, credit cards, mortgage, leases, tax returns, pension, and more. These are outlined thoroughly in our Document Checklist. This often takes a lot of time to gather, so don’t expect it to be completed in a couple of days. Allow yourself a few weeks to find everything. And make copies for yourself, your spouse, and the divorce professionals you are working with. Prepare a storage box to file each document as you find it so everything is kept in one place.
3. Open bank and credit card accounts in your name
Now that you are no longer sharing every aspect of your lives, it is a good idea for each spouse to open a bank account and credit card in his or her own name. Not only does this allow for greater privacy in how each of your manage your finances, it is particularly important to do this before the divorce if you are the lower-earning spouse with little or no income. A bank is more likely to accept your application for credit if you are covered by your spouse’s income. In addition, find out if both your names are on the household bills. If your name is not included, you may have a difficult time establishing credit on your own once you are single. While you continue to cohabitate, update all bills to include your name, as well as your spouse’s name to help build a solid credit history.
4. Define your Wish List
Divorce often leaves both spouses with less money than what they’ve become accustomed to. After all, running two separate households is costlier than sharing one. With this in mind, accept that you may have to compromise on what you think you “deserve” after the divorce. Again – this may require you to turn off those emotions to think clearly. Create a list of all your financial priorities. What is negotiable? What are you unwilling to compromise on? Of the non-negotiable items, prioritize them from really really non-negotiable to “I can live without it if I have to” non-negotiable. Just as a marriage requires sacrifice and compromise, so too will your divorce. Once you’ve completed this list, consider visualizing how your post-divorce life. Write it down, if that helps. Then return to your list to review, once more, what is necessary and what you can live without.
5. Get a Lifestyle Analysis
This is an ideal time in your life to start paying careful attention to your spending habits. Review your credit card statements and bank account activity from the past few months. This will help you understand the cost of your current lifestyle and may help you determine whether maintaining it post-divorce is reality or fantasy. It’s a good idea to hire a certified financial divorce analyst to create an analysis for you and provide a snapshot of what your current life costs while providing options on how you can maintain it after the separation papers are signed.