Money could be considered the greatest cause of Divorce. In fact, there are some studies that suggest that how ofter a couple argue about money could predict their likelihood of divorce. Once you’ve reached the point where you are going through a divorce, your finances will suffer as your assets are split in half. What you do after the divorce will lay the foundation of your finances. There are a few things you can do to make sure that you aren’t overwhelmed, and keep your head above water.
- Be Conscious of Asset Division – Not all assets are considered equal. Having $250,000 in investments is different than having a $250,000 in a home. The $250,000 home may include a mortgage which would mean the home comes with more expensives and the need for more income. One of the biggest mistakes I’ve seen in divorces is that one spouse wants the house regardless as to whether they can afford it. This restricts their budget, and limits their ability to get ahead in life. Likewise, if the other spouse wants all the investments, which are usually tied up into retirement accounts, they cannot access them unless they are 59 and a half. It is important to make sure that the assets you receive are flexible enough to help you adjust to your new situation.
- Invest Early – For some spouses, this might mean investing in their education. For others, it might mean establishing the habits needed to fund your retirement, or send your kids to college. Either way, it is imperative to start a good habit of investing if not merely for the deeper meaning that you are living below your means.
- Don’t Bite Off More Than You Can Chew – In most relationships I encounter there is one spouse that handles all the money, and the other spouse is more than happy to let them. If you are the spouse that has never really played an active role in your finances, the idea of a divorce can be overwhelming enough, let alone to have to handle all your finances. If you are in this situation, you may want to consider getting some advice. Finding an advisor can be just as overwhelming which I’ll leave for another blog. For this article, I’ll just direct you to http://findanadvisor.napfa.org. At NAPFA you’ll find competent, fiduciary advisors that work for you on a fee-only basis.
- Give Yourself Something To Look Forward To – One of the benefits of creating a financial plan is that it gives you something to look forward to. You can dream of retirement, budget in travel, and do the things you didn’t think you could do while you were married. If you have a plan and your finances are in order, your ability to accomplish your goals is much more likely to happen.
Going through a divorce can be difficult enough. What you do with your finances before, during, and after a divorce can have a big impact on your quality of life.