Financial do's & don'ts during a divorce


By Melanie Lockert, personal finance freelance writer and author of Dear Debt

Nobody gets married thinking one day they’ll end up divorced. But for nearly one in two people, “I do” will turn into “I don’t.” While the impact of divorce can leave you with a broken heart, the consequences go far beyond emotions.

Getting a divorce can turn your financial life upside down. Untangling years of partnership — and your bank account can be a messy, unpleasant affair. Worse yet, when things are heated, and you’re in an emotional state, it may not be easy to make rational, informed decisions about your finances.

If you’re going through a divorce, here are some financial do’s and don’ts to guide you through this tough time.

Financial Do’s During a Divorce

When going through a divorce, there are certain things you want to do for your finances and certain things you may want to avoid altogether.

The first thing you want to do is take an inventory of your financial accounts. “Add up your assets and debts. Determine which are 'marital' vs. which preceded the marriage. Assets such as unvested stock options or earned (but not yet paid) pensions must be included, even though they have no cash value today,” says Sara Stanich, Certified Divorce Financial Analyst at PowerOverDivorce.com.

Once you’ve assessed your financial situation, it’s time to come up with a plan moving forward, says Stanich.

“Agree with your spouse to either maintain the "status quo" financially (ie. paying household expenses from a joint account) or separate your finances immediately when the divorce settlement is decided and finalized,” Stanich says.

If you don’t have any children together, it may be best to separate your finances as soon as possible and come up with a plan to move forward. Instead of quibbling over every last detail, Bobbi Rebell, author of How to be a Financial Grownup, who experienced a painful divorce at age 30, received the advice to treat a divorce like a financial transaction and focus on making it as simple as possible, rather than focusing on what is fair.

That can be tough when it feels like you’re fighting for everything you feel should be yours. Suddenly you go from “ours” to “yours, ” and the change can be tough. But Rebell says moving on quickly and efficiently (as much as you can with these sort of things) can actually be good for your finances.

“You have so many years to make up for making a less than perfect financial settlement,” says Rebell. “By dragging it out, you are not only paying lawyers, you are distracting yourself from focusing on your job or business, and that will cost you more in the end,” she says.

Focusing on the process of getting divorced rather than on dragging it out and fighting dirty can make for a more cost-effective divorce and can help you achieve freedom and the peace to move on.

Alan Steinborn, founder of RealMoneyLife.com, originally felt like fighting for half of everything when going through his divorce, but at the suggestion of a mentor, he decided to stop the fighting and move forward with an uncontested divorce.

Aside from focusing on creating a financial plan going forward and untangling your finances, you also want to make sure you check your credit report during this time. You’ll want to avoid debt as much as possible and keep your credit in good shape. Once you have a plan in place going forward, you’ll want to remove the other party off of any bills, accounts, utilities, etc.

If things do end up getting tense and unmanageable, you may want to hire an attorney. “Even if you and your spouse agree on the important issues, divorce attorneys know the tax implications and are well-versed in solving sticky financial issues,” says attorney Rebecca G. Neale of ThePersonalFinance.Lawyer.

What NOT to do during a divorce

Now that you know what you should do during a divorce, it’s key to understand the things you should avoid during a divorce.

The most important thing? “Make financial not emotional decisions,” says Roger Wohlner a financial advisor at The Chicago Financial Planner.

It’s easy to get caught up in the heat of the moment, but if things are too tense, consider holding off on important financial discussions until tempers are cooled. When that happens, consider meeting at a neutral location outside of the home to discuss your finances going forward.

If that doesn’t work, you may want to work with an impartial party to help you navigate next steps. “It might help to seek the help of an impartial third-party like a financial advisor,” says Wohlner.

During the divorce process, it’s important to be open and honest about your financial situation. Trying to hide assets, lying about any debt, or making sudden moves can add insult to injury. Though your future together may be over, you still have to work together to figure everything out.

“Don't try to hide money in separate accounts or under the mattress. Everything needs to be disclosed eventually, and you might as well save yourself time and legal expenses by being up front from the beginning,” says Stanich.

Lastly, Stanich suggests not maintaining the same lifestyle you had when you were married. You will need to adjust to your new financial reality. Depending on your situation that could include additional expenses like alimony, child support and more.

Don’t live like you have two incomes sharing expenses when you’re adjusting to single life or else risk getting into more financial trouble.

Though your financial situation has changed, that doesn’t mean you should stop saving for your future. “Don't stop contributing to your retirement if you can afford to do so,” says Cary Carbonaro, author of Money Queen Guide For Women Who Want to Build Wealth and Banish Fear.

Final Word

Getting divorced can be one of the most painful, stressful life events you go through. It can also complicate your finances in ways you wouldn’t imagine.

If you’re considering a divorce or in the thick of one right now, check out our full guide to handling your credit during a divorce to get on track so you can start fresh. 

Written on November 2, 2016

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