Organizing and streamlining your finances may not be the first thing that comes to mind when you’re thinking about how to prepare for a divorce. Most people are focused on managing their emotions and heartbreak, and it’s overwhelming to think about marital assets, money management, and financial preparedness.
But—speaking as a divorce coach who has worked with clients all along the financial spectrum—let me tell you that thoroughly documenting your financial landscape is very, very important to your future financial health and to getting a fair divorce settlement.
Even if it looks like your divorce will be settled amicably, it is critically important that you take responsibility for your financial situation into your own hands. Doing this will avoid any nasty surprises later and will help ensure that you can take care of yourself after the divorce is final.
> Organize, organize, organize (your financial information)
It may seem like overkill right now, but gather and organize as much information as possible about all of your financial accounts, and copy or file away any other related documents that could help during your divorce proceedings. Also make sure you keep a record of any conversations, emails, or texts where you and your ex negotiate or exchange information.
It may feel uncomfortable or even underhanded, but you (or your lawyer) will need to reference all of this information on your divorce paperwork. And you and your ex will be negotiating everything from splitting assets and paying child support or (potentially) alimony payments to figuring out living arrangements and child custody schedules.
When gathering document, think about:
- Bank statements for checking, savings, retirement, and investment accounts;
- Mortgage statements and documentation,
- Credit card and personal line of credit bills;
- Documentation for car loans, student loans, and other outstanding debts;
- Paystubs or other income documentation;
- Copies of income tax returns; and
- A list of pre-marriage assets and liabilities as well as those accumulated during the marriage.
By gathering and preparing this information now, you’ll be better prepared to advocate for yourself later. And if you hire a lawyer, it will take less time and be less expensive for them to do their job and support you.
> Keep track of your expenses
It’s extremely common for women to not be involved in marital finances, but now is an excellent time to start tracking your expenses and figure out where your money goes.
The first thing I’d recommend is grabbing a notebook and tracking all of your spending for the next several weeks—everything from groceries and bills to your hair cuts and the latte you grab on the way into work. Most people vastly underestimate how much they spend on a weekly basis, and this exercise will help you figure out exactly where your money is going. If you don’t want to use paper and pencil, there are several money management apps out there that can help sort and track this information.
As you’re doing this exercise, don’t forget to look at recurring bills like utility payments; car maintenance bills; car, home, or health insurance payments; and regular withdrawals for savings or retirement accounts.
> Make—and stick to—a household budget
I know, I know… budgeting isn’t fun or easy. And lots of people struggle with making a plan for where every dollar goes and then sticking to that plan. Discipline and consistency—especially when you’re already feeling overwhelmed—is difficult.
However, I highly recommend doing this because it will help show how much alimony you need (if you’re asking for it) and what the actual household expenses are (if you are the one who may need to pay it). Or, if you need to move out and find a new living situation, it will also help you assess how much you can afford in rent and utility bills.
> Make a list of your assets and liabilities
It’s tempting to skip this step, but it’s surprising how much value can be tied up in assets, and it’s important to make a comprehensive list of anything valuable that you and your ex own.
This list should include things like guns, jewelry, expensive machinery, furniture, electronics, and any other high dollar items owned by either you or your ex. Real property like your primary residence and investment homes or rental properties should go on this list too.
And if any of these items have been appraised, make copies of those appraisals to keep in your files.
> Take command of your financial accounts
The last thing you need in the divorce process is for nasty surprises or unexpected expenses to crop up. So with that in mind, start thinking about where you can separate your financial accounts from your ex’s and maintain independence.
- If you have joint credit cards, try to get your name off of them or remove your ex if you are the primary card holder—especially if you don’t use the card. Many banks will require that the cards be paid off before they will remove a co-signer, so be prepared for this.
- If you don’t have them already, open your own banking accounts and start depositing money there so you are prepared for future bills. You should also review your automatic bill pays and transfer them so that any bills you are responsible for come out of the new account. Be careful about transferring jointly owned money into your new account though. If you’re unsure about what you’re entitled to or you and your ex can’t come to an agreement, ask your lawyer.
- Request your credit reports, look for any past due debts, and keep monitoring your credit score and joint accounts. Just because your ex says they will pay off a debt, it doesn’t mean it will actually happen, and you don’t want their bad judgment to impact you.
- After you’ve pulled your credit reports, place a freeze on your accounts so that no one can request a credit report and open up a new account in your name.
- Finally, change all your passwords and pin numbers. You don’t want anyone to be able to guess your login credentials and make unauthorized changes to your accounts.
Taking these steps may seem unnecessary, particularly if the divorce process seems to be going well. Unfortunately, divorce processes can turn unexpectedly nasty, and you’ll want this information in the event that it does.
But, even in a best case scenario, having this information readily available and knowing where your money goes will make the process much easier. And in either situation, proactively planning for your financial future will help prevent anxiety, stress, and unnecessary expense. Do you have questions about what a Divorce Coach does, or how I might be able to help you navigate through your divorce process?
I’d love to talk with you about what you need and how I can help you create a new, fulfilling life! Feel free to email me, or follow me on Instagram for practical tips and advice.