Maybe you're the one who managed the family finances. Or maybe you were the one that assumed it was all being taken care of. Regardless of your role, the finances of a married couple are vastly different than those of a single or divorced individual.
So what do you need to do now, before you take the next steps toward divorce, to understand your family finances and what your financial future might look like?
Step One: Prepare a Budget
I know, I know, nobody likes to do a budget. But you will be much better off in the long run if you do. So what exactly do I mean when I say budget?
Do I mean get a cocktail napkin and jot down a few random thoughts about how much gas for your car costs or what you think the mortgage is? Sorry, that's not gonna cut it. If you're going to get divorced, you need to take this seriously and so it's time to raise your game.
Think of budgets as being broken down into three sections:
Section 1: Shelter - these are all costs directly related to the place in which you live. Rent, mortgage, insurance, taxes, utilities, repairs, service contracts, lawn cutting and snow removal. You may just think that owning a house or renting an apartment is just the cost of the mortgage or rent. But it's so much more. Really take the time to think through each of these expense categories and come up with realistic estimates for each. Thinking of renting an apartment? Get the local paper and find out what apartments in your area really cost. Don't just wing it. Then take it one step further and call the utility company and ask if they can provide a yearly estimate on what it costs to provide service to the apartment you're looking at.
Section2: Transportation - a big part of what we spend our money on each month falls into this category. Your car payment car insurance, gas, repairs, tolls, license and registration all fall in here. Find out what it will cost to insure just your car as most companies offer multi-car discounts which will go away once you're divorced. Also be realistic about the age of your car. If it's new, then maybe you can go light on the "repairs" budget entry. But if it's approaching 100,000 miles, my guess is each trip to the mechanic is going to cost you $600 to $1,200!
Section 3: Personal & Household - here's where you really have a lot of control over your budget. This section includes items like food, toiletries, sundries, household supplies and prescription drugs. Also give thought to the cost of health insurance as if you're currently being covered by your spouse’s policy that is going to be a major expense for you if you can't get coverage thru work. Then move on to the recreational things like eating out, vacations, buying wine or tobacco. Add up the costs directly related to the kids like child care, babysitting and day care. Remember you won't have your spouse to cover for you if you need to work late or want to go out - it may be sitter time. Finish off with all the feel good stuff like vacation spending, gift giving, charity donations and savings. When you really start thinking about this, you will be surprised at how much money goes into this section.
Step Two: Prepare a Balance Sheet
This part is a bit harder as you'll need to know what assets and liabilities you have so do the best you can.
On the asset side, you'll want to know how much your house is worth, what bank accounts you have and their balances, any retirement accounts and their current value, and stocks or bonds you own and any personal property which is worth something like coin collections or furs.
On the liability side, it's the mortgage and any home equity loans, credit cards, car loans, student loans and back taxes owed.
It’s also important to note whose names all of these are in. Do you have a credit card in your name only as well as a joint account? Is the mortgage in one party's name but the deed is in both of your names? All important items to know.
Step Three: Work with a Divorce Financial Analyst
Congratulations! If you've completed steps one and two you are well on your way to getting your financial house in order and setting yourself up for success in the long term. But there's one more step you need to take to make sure you've covered and that's work with a Divorce Financial Analyst.
Sure you've been able to pull all this data together but what does it mean? How much child support and alimony can you expect to receive? And what would a fair settlement look like? These are all questions a Divorce Financial Analysts can answer for you.
You see, gathering information is just one half of the plan. Now you need to know what your future finances are going to look like so that you can make informed decisions about your future.
Questions that will be answered may include:
- Can I afford to stay in the house?
- If I do need to move, how much can I afford in rent?
- Can the kids still keep participating in their activities or will we have to cut back?
- How do I plan on saving for my retirement?
- When will I be able to buy a new car?
Setting yourself up for financial success post-divorce has just as much with information gather before you leave as it does with making a realistic plan for your future. This is where the help of an independent professional can really come in handy. I mean after all, living in a 10 bedroom, 7.5 bath mansion sounds good to you and why shouldn't your ex pay for it!?
But if all you're going to get in support is enough for a 3 bedroom, 2 bath Townhome, you may want to hold off on singing that real estate contact just yet!
Don’t Forget To Ask For Help
You may be thinking to yourself “this is a lot of work!” And you’d be right.
But like the old saying goes about an ounce of prevention being worth a pound of cure, in the case of divorce, a little planning can go a long way.
Things are going to change and possibly, quite dramatically. By being smart and recognizing that now, you’ll have time to craft a plan to help you navigate the potentially choppy waters ahead.
Do some legwork; enlist the help of a Divorce Financial Analyst and I promise you you’ll be much better off than if you didn’t!