11 Ways to Maintain Financial Independence During Your Divorce
Divorce is a difficult chapter of life. Even if your divorce is amicable, you will still be faced with mountains of paperwork, long legal proceedings, and difficult conversations. And research from the U.S. Government Accountability Office finds that when a heterosexual marriage ends, women still tend to experience a larger drop in income. Women’s household income falls by 41%, while men’s income only falls only 23%. For many women, achieving and maintaining financial independence seems difficult when they’re married…and even more daunting when they are faced with the concept of managing their finances post-divorce. If you’re considering a divorce and wondering how to prepare financially for a divorce, here are our 11 best tips for how to survive divorce financially.
1. Find your financial records
Things can get a little chaotic in the midst of divorce proceedings, moving out, and moving on. Start with the most important thing on your divorce checklist: finding all of your financial records. You can do this as soon as you start thinking about divorce, or even after your divorce. Organizing your financial records is an important step in the process. Try to find the following documents:
- Past tax returns
- Bank statements
- Social Security statements
- Any documentation on loans
- Retirement account information, including any 401k accounts
- Investment account statements
- Employment paperwork, like contracts
That’s a lot of paperwork – so it may take some time to put it all together and organize it. You should start preparing for your divorce as soon as you start thinking about it, because having your documents in one place will save yourself time – and money. It’s especially important for your legal proceedings.
2. Assess your marital assets and marital liabilities
Assessing all of your marital assets and liabilities is an important part of your divorce, especially your legal proceedings. You need to watch out for any assets or debts that were acquired during the marriage. That means assets that you acquired yourself – or jointly.
What do we mean by this? Well, assets could be any property that you – or you and your partner – bought during the marriage. It also means any value added to your bank accounts, real estate, any retirement accounts opened, or any miscellaneous assets, like a boat or a car.
You need to include debts acquired during your marriage, as well, because this will be accounted for in marital liabilities as well. If you both took on significant debt during the marriage, that will need to be discussed during divorce proceedings as well.
3. Do you have non-marital assets?
Non-marital assets include any property you may have had before the marriage. In most states, your pre-marital assets will stay yours. Similarly, any debt you acquired before the marriage will stay just that: your debt.
In addition, any inheritance you – and only you – received from a third party will remain yours.
4. Open a P.O. Box
When you start your divorce financial planning, consider opening your own P.O. Box. Why? Well, when you start the process of getting divorced, you may want to move out of your joint living situation. A P.O. Box will create a safe and secure place for you to receive your mail. It will let you communicate with people and take in financial statements as well. This way, you can start to separate your lives.
5. Understand your legal fees
For many people, divorce is an emotional undertaking. But it’s also a significant financial undertaking as well. Divorce can often lead to substantial legal fees, which is why it is important to determine how much your legal fees will cost.
Consider taking a few calls and figure out what your average legal costs may be – and you can start setting aside settings. You can also consult with different attorneys to compare their rates – and their reviews.
6. Open your own bank accounts
Many women often have a joint bank account with their partners or spouses. When it’s time to divorce, you need to open up your own new accounts – ones that only you can access. You may even want to consider opening a checking account and a savings account at different financial institutions.
Once you have your new bank accounts, you need to handle your bills. Update your direct deposit information to make sure your paycheck goes into the right account – and not your joint account. Some women may need multiple bank accounts, while others may just need one. Opening your own account is an important step in preparing for your divorce financially.
7. Open your own credit cards
On the same thread of thought: it’s time to open your own credit cards. Many couples have joint credit cards when they are married. That’s completely normal! But now that you’re divorced – or getting divorced – you need to open a credit card in your name only.
A new credit card is the first step in building up your credit report, so long as you use it responsibly. More on your credit report next!
8. Get your credit report
Your credit report determines your financial future (at least in part). Protecting your credit score during the divorce is something to think about. First things first: get a copy of your credit report. You are entitled to a free copy of your credit score every 12 months (here).
When you do get your credit report, you need to sit down and go through it all. Do you see anything that looks off? Is everything correct? If you see any false information, you need to resolve the issue right away. Be on the lookout for debt you do not recognize. Some spouses engage in financial abuse and saddle their partners with unknown debt, which could also be an identity theft crime. The faster you act, the better chance you have to remove the mistakes.
9. Change your will
Not everyone remembers their will when they are considering divorce. As with any major life change, you need to consider your will and end-of-life arrangements. There’s a good chance that your partner is listed in your will. Now that you’re divorced, you need to take your ex out of the equation – or at least figure out your new beneficiaries and your will.
Each state has their own rules about removing your spouse from your will. Some states will make you wait until your divorce is final. However, it’s crucial to take action on this as soon as possible – or at least add it to the top of your to-do list.
10. Update beneficiaries on your accounts
Aside from your will, you should consider your beneficiaries on your accounts. There’s a chance that your life insurance policy, brokerage accounts, or any 401k accounts have your partner listed as a beneficiary. You should change your beneficiaries as soon as possible.
If you have yet to start your divorce – or finalize it – you should know that changes to many employer sponsored retirement plans (e.g. 401ks) may require your spouse’s permission. Make sure to consult your legal team if you have any questions or concerns.
11. Don’t be afraid to ask for help
Does all of this sound overwhelming to you? There’s no need to go through this process alone. We know divorce often feels lonely and overwhelming. We’re here to help with the financial side to let you focus on healing and moving on. Reach out to a financial advisor if you need help with your financial planning! We’re your resident divorce financial advisors!
Divorce is one of the most life-changing events anyone can go through. Being financially prepared for this big step in your life can help you feel less stressed. It can also help you feel more financially prepared to move on from your relationship and set yourself up for a financially independent future. And if you feel insecure and confused about it, you should speak with a financial advisor – we can break it down for you, step by step!