6 Baby Steps: Financial Planning In The Beginning Of Your Divorce
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By Christopher, Guest Author - January 13, 2017

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When you’re in the midst of the emotional thunderstorm that usually accompanies a divorce, it can be hard to think about practical considerations. But the reality is, getting divorced marks not only the end of a life partnership, but the culmination of a business relationship as well. Painful though it may be, it’s worthwhile to do some financial planning in advance, before you set down the road for divorce.

Taking a careful look at your finances and planning out the fiscal details of your new life apart can ensure that you start on stable footing and in solid financial health. Moreover, it will help make the divorce process itself run more smoothly both for you and your spouse. And while many people are overwhelmed by financial matters, you may find it a welcome distraction from some of the more emotionally draining aspects of the divorce. 

Divorce: The Ending of Two Relationships

To financially plan for your divorce, start by making a mental separation between the two relationships that are coming to a close: the financial and the personal. Put practical considerations first, asking yourself what will happen when you end the “business” side of your marriage.

Below are six tips to help you prepare for the financial aspects of a divorce. Following these steps before you start the divorce process will help you both emotionally and financially later on.

1. Imagine your life after divorce.

Start by thinking practically about what you want your life to look like after you separate. This is not easy to do. Most people tend to focus on the problems in their current situation and the frustration and anger they are experiencing now; they don’t take the time to visualize the alternative in a pragmatic way. But that alternative is dependent on your financial situation. If you are considering divorce and haven’t filed any paperwork yet, now is the time to start planning for your life on your own.

2. Take stock of your current financial situation.

In addition to imagining your new life, you also want to survey your overall finances. Many people don’t really know what their financial situation is. Start by figuring this out. If you have a huge pile of unopened mail, get to work reviewing it!

This is when it’s time to delve into the numbers a bit. Make a spreadsheet of all your combined assets and debts. List every bank account, credit card debt, student loan, car loan, and more. If you own your own home, estimate its value and subtract the amount you still owe on the mortgage. When everything is on the chart, you should be able to see exactly where your business partnership stands. If you add up all the assets and subtract all the debts, you will have the net worth of your partnership. This number is the starting point for financial planning and will be needed during the divorce process.

3. Estimate how much you will have post-divorce.

When your divorce is finalized, all of your finances and possessions are usually divided up evenly, with provisions made if one partner will be primarily in charge of taking care of the children. To get a sense of how much money you will have after the divorce, you can take a look at your net worth and divide it in half. Your income post-divorce will depend on your own salary, plus any child support and alimony you may receive. Use these guidelines to think about what you will be able to afford in your new life.

4. Consider your housing options.

If you have children, family, and/or work in the area where you live now, this might be an easy question. For others, it can be very complicated. Is your family far away but your spouse rooted to the area where you currently live? Do you have children who won’t want to leave their friends behind? Do you live in an expensive area that you might not be able to afford on your own? Do you and your partner have one small social circle or do you have separate friendships? You’ll want to weigh a variety of factors when thinking about where to live.

I encourage people to really think about this question in a clear-minded way. A perfectly good answer might be that you don't know right now. If you aren’t sure, but you know you need to move out on your own as soon as possible, consider getting an apartment with a month-to-month lease. Buy yourself some time to figure out what you really want.

Spend some time researching how much rents cost in your area. How much will you need each month to rent a space on your own? Is it likely that you will stay in the house or apartment you are currently in? If so, can you afford the mortgage or rent on your own?

5. Put some money aside.

If it looks likely that you and your partner are headed towards divorce in the near future, I highly recommend setting aside a bit of money for this transition period. Divorce can be an expensive process and it can take time. Open a new checking account in your name only, if you don’t have one already. You can deposit some of your own money into this account or have part of your paycheck automatically deposited into it.

Remember that in the eyes of the court everything is jointly owned, so this money technically belongs to both you and your spouse. You will be able to have some control over it, however, and if it’s in your own account there is a good chance it will go to you at the end of the divorce. At any rate, if you leave the marital home during the divorce process, you will be able to use this money for your living expenses, and if you need to hire a divorce lawyer, you can use this money to pay for it.

6. Separate your finances.

In addition to putting aside money for the divorce process, it’s a good idea to start separating your finances as soon as possible. Even if everything technically belongs to both of you, starting now will make things easier down the road. Eventually, all of your possessions and finances will be divvied up. If you rent an apartment, put it just in your name. Consider moving all of your direct deposits to your new separate bank account. If you don’t have your own credit or debit card, think about getting one just in your name.

It will be easier to go through the steps required in order to get divorced once you have a good sense of your financial situation and you can start to imagine what your new life might look like. While thinking about finances can seem cold in the midst of something as emotional as a divorce, having the money side of things sorted out can actually save you and your partner a good deal of heartache. Plus, it actually improves the chances that the process will go smoothly for both of you.

So take some time to start planning the financial aspects of your divorce.  It will help make a difficult transition that much easier.

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