When you’re facing a divorce, you experience a drain on all areas of your life. It takes patience and planning to come out on the other side. In the moment, it can feel like you’re spiraling out of control. Yet, with some helpful tips, you can come out with your sanity intact and the divorce finances regulated.
According to the Australian Institute of Family Studies, the age range with the highest rate of divorce is between 25-29 years. If you’re experiencing a divorce, you’re not alone. No matter your age or demographics, you can recover from your divorce as long as you’re proactive and take steps to protect yourself.
One of the most contested parts of a divorce is what happens to your finances. In the moment, you’re only concerned about how you’ll get through to your next chapter. You worry about your family, your friends, and your work life. However, protecting your finances is an important part of the process no matter your age or income level.
In this guide, we’ll address the dos and don’ts you need to keep in mind when it comes to your divorce finances. The sooner you take action, the better your odds of recovering with no impact on your finances. The decisions you make during this time will affect your short-term and long-term financial security, so proceed wisely with these tips below.
Financial Dos After Divorce
First, let’s talk about the steps you need to take. Things might seem to be moving fast after a divorce. You want to move on as quickly as possible and put this negative experience behind you. However, it’s essential you take the time to pay attention to these steps to protect yourself.
It’s easy to let your finances go when transitioning through this phase. It’s important to be proactive and positive in any way you can, and know that these financial steps will set you up for success in the present and near future.
Do: Make a new budget. Your standard of living is going to change, and this is a reality of divorce finances. You’ve gone from having two incomes to only having one. This can also be a positive thing since you now have a chance to focus solely on what you need and value. Work with a financial planner or budget expert to decide on a budget that works for your sole income and expenses.
Do: Gather your records. Another important step is to make copies of all of your important financial records. Try to find records for the past 5 years, since this will likely be most relevant to any legal proceedings. Your records should include loan applications, tax information, property deeds, credit card statements, and insurance policies.
Do: Know your debt. It’s not uncommon to find hidden debt during a divorce. In some cases, you could be found responsible for this debt, especially for loans or credit cards that are issued jointly. To protect yourself from any surprises, get a full credit report. Also, close any joint accounts so your ex-spouse’s credit will no longer affect yours.
Do: Document your belongings. You need to make a clear record of all of your household goods. Take photos of any assets that have value to you like art, jewelry, or even furniture. If you acquired these things during your marriage, half of these things are likely owed to you. If you helped your ex-spouse financially during your marriage, you might be eligible for more than your half of these things.
Do: Review your accounts and your documents. Finally, it’s time to second-check your accounts and documents to make sure everything is adjusted accordingly. Accounts need to be in your name alone, and that might require documentation. You’ll also need to review any wills, estate plans, and insurance policies. Once again, a financial expert can help you through this process.
Financial Don’ts After Divorce
Aside from the above steps, there are some things you should avoid doing after a divorce to ensure a smoother transition. While you might be tempted to hold onto as many assets as you can, that’s not always the smartest financial decision. Here are your don’ts for regarding divorce finances.
Don’t: Hold onto the home. If you shared a home with your ex-spouse, it might have a lot of sentimental value. However, keeping a space that’s too big for you to afford on your own could spell financial disaster. A home is expensive long-term, and it might be the right move to downsize.
Don’t: Ignore your taxes. Your tax burden will likely change after a divorce. It’s easy to push off dealing with this, but the sooner you manage your new tax situation, the lower the financial strain. You don’t want to face a higher tax bill unexpectedly.
Don’t: Assume equal division of property. Sometimes splitting belongings equally is the right move, but not always. Pay attention to the details to make sure you’re getting your fair share of all assets and sentimental belongings.
Managing Your Divorce Finances with Confidence
With some time, you’ll discover that it’s manageable to untie your finances from your ex-partner. Coming out on the other side of divorce is tricky but you don’t have to handle these steps alone. Working with a financial advisor is the best way to make sure you’re protecting yourself and getting your fair share every step of the way.
Ultimately, you’re in charge of your own financial future. Take these dos and don’ts seriously if you’re currently experiencing a divorce. The better prepared you are, the smarter decisions you’ll be able to make about your future. Contact an expert at Debt Busters today on 1300 368 322 to get started on the right track forward.