4 Ways to Financially Prepare for Divorce
Jan. 20, 2019
The cost of divorce usually consists of legal fees and lawyers’ fees, and it is determined by different factors. Whether you are using a common lawyer or have an independent lawyer is one of the factors that will significantly impact the overall cost of your divorce. However, while sharing the same attorney may save you some of your lawyers’ fees, you need to understand that your ex-spouse’s legal counsel is not obligated to serve your best interests. With that in mind, here are 4 practical ways to financially prepare for your divorce.
Track Your Spending
Lengthy divorce procedures can really take a toll on your finances. As soon as you and your spouse decide on a separation, start tracking all of your income and expenses. Apart from helping you budget for the divorce, tracking your spending will give the judge a clear perspective of how to divide the debts and assets and whether or not to award child/spousal support. In addition, at some point in your case, you will be asked to provide the court with an Affidavit of Financial Information and your household budget will be a significant part of that. Organizing that information now will help reduce stress later.
Be sure to include your household bills, food, travel, childcare, maintenance, and anything else that you spend your money on as part of your budget. Having a spending record that spans several months or years prior to your divorce is even more ideal. You can get an estimate of your past spending's using your bank and credit card statements.
Prepare Documents for Full Financial Disclosure
According to the law, you have a “duty of disclosure” that requires you to provide full and accurate disclosure of financial information that is pertinent to the divorce. Financial disclosure should be exchanged before you reach any final agreement. This step is mainly designed to establish your combined property and monetary worth, which is useful when determining things such as division of assets and child or spousal support provisions.
Gathering these documents can be a lengthy and tedious process, so it should be done as early as possible. If you share any accounts with your spouse, you can request the necessary information from the relevant financial institutions. Some of the sources that may come in handy include:
Recent pay slips
Credit card statements (from the past year)
Ledgers for any loans, including auto loans, mortgage, and personal loans (from the past year)
Investment account statements (from the past year)
Retirement account statements
Checking and savings account statements (from the past year)
Income tax returns (from the past 3 years)
List of assets and debts acquired during the marriage and those brought into the marriage
Self-control and self-discipline are important virtues to possess, and they will be tested to the limit as you prepare for your divorce. After spending so much time together, sharing special memories, and making cheesy promises to one another, the sudden realization that everything is about to change can be overwhelming. As a coping mechanism, you may find yourself consumed with extravagant spending sprees even with the knowledge that your money is limited.
This will not help the situation, but rather make it worse. You need to have a solid financial backup to cushion your landing. This will involve tightening up your budget and trimming certain expenses such as eating out, shopping, and “fun” money. Evaluate your expenditures keenly and ask yourself whether you really need all those items. For instance, is it absolutely necessary to spend $100 at a restaurant when you can cook for yourself, or do you simply find it convenient? Granted, budget cuts during a divorce are not easy, but you will be able to gradually add those luxuries back later on in life.
Hire a Financial Advisor
One of the worst divorce mistakes you can make is seeking financial advice after the final settlement is made. If you do not know where to start, ask your lawyer if he/she can recommend a good financial planner, especially one who is experienced in divorce matters. Keep in mind that law school does not offer the necessary training required to provide professional financial planning advice, so your lawyer is simply not equipped to calculate and quantify your financial needs.
The most important thing you can do to prepare for your divorce is consulting an attorney who has sufficient experience in family and estate law. If you have any questions, queries, or concerns regarding your case, Tad Davis has your back. Call now.