Divorce is one of the most emotionally driven situations you can experience. It is the severing of commitment with someone you once loved and believed you would be with for the long term.
However, when approaching your finances, try your best to keep emotion out of it. Keeping feeling out of action steps will help you make levelheaded financially best decisions, not emotionally driven by either party.
Financial Steps To Take before Divorcing
There are several financial first steps for divorce. I recommend that as soon as you know you will be getting a divorce or considering it, you begin with these steps.
Create a safety plan
If there has been any abuse in the marriage (including emotional), the first thing you want to do is create a safety plan.
Include money safety in your plan. What I mean by this is to determine that if the need arises to leave quickly, do you have sufficient access to money that your abuser cannot cut off?
If your credit cards and all cash are in his name or shared with him, you may want to start some of your financial accounts. Consider opening a credit card and bank account in your name. Create a stash of cash in case of an emergency. Start doing some side work and stashing away a little money.
Change all your passwords
Start with your accounts holding your sensitive information such as credit cards, bank accounts, systems for your job, retirement accounts, and anything else with important information or assets. Be sure to include changing your PINs and secret words with your banking institutions if your spouse tries to call in to make changes or remove money.
Duplicate key documents
Make sure you have a copy of anything important. Here is a great checklist created by Fidelity.
Print it out or find and make copies of as many of these critical documents as you can find. It may take some detective work at first, especially if you haven’t been the one in charge of finances and important documents during your marriage.
Start by snooping through desks, files, and computers to find the information, accounts, and passwords you need.
Duplicate or back up photos
Memories are precious; you will not want the devastation of losing them. Consider where they are stored and if you will have access to the family device or hard drive after a divorce.
Of course, you may not want to keep photos of the two of you, but the kids’ ones and any memories you want to keep for the kids’ sake.
Ensure any mail that you want to be kept private is secure
The easiest way to do this is to get a PO Box of your own if you have not moved out of the family home yet. Change the mailing address with any sensitive information to your PO Box. A free secondary option would be to ask a trusted family member or friend to allow you to have some private mail sent to their home to have them collect it for you.
If you don’t have separate banking, start now
Open your account and begin to have any income direct deposited here rather than your joint account.
Suppose you would like to open a checking account. Look for a fee-free checking account. Some places to start looking for this type of checking is Ally Bank, CIT Bank, or USAA (if you qualify for membership).
I don’t think there is any reason to pay fees for a checking account unless the bank offers conveniences and services worth the costs. Take the time to be aware of the fees you will pay and decide if you want to pay for them.
Suppose you would like to open a savings account. Look for one with higher earning interest. Many of the big banks today offer only a 0.1% interest for savings. Look for one that offers over 1.5%.
You can start by checking with Ally Bank, CIT Bank, or many big-name credit card banks offering high yield savings such as American Express, Discover Bank, and Capital One.
If you are still paying for joint household or childcare expenses, you can funnel your portion to the joint account if your ex or soon to be ex is trustworthy in this regard. If your ex is not, suggest which bills you will pay to equal your half or send half of each amount owed straight to the lender/payee. Then you can offer your spouse does the same.
Creating a payment agreement may need to be worked out with lawyers. Remember that if your name is on any bill and he doesn’t pay his half, you will still be liable for the full amount. If it comes down to it, you will be better off paying in full and keeping track of what you paid for reimbursement during the splitting of assets.
Establish Your Credit and Separate What You Can
Suppose you don’t have any credit in your name or with you as the primary account holder. It is time to establish a credit card in your name. If you have healthy enough credit, choose a sound card that will serve you best.
If you are unsure if you have a score or what it is, you can sign up for a free app called Credit Karma. It is a helpful tool to get an estimate of where you are with your credit score. Just remember it is not your actual FICO score, but it is a decent estimate to help you see your score’s broad range. It can also suggest credit cards that you would qualify for. Credit Karma can be helpful to get an idea of where you stand.
There may be a reasonable possibility of a credit card in the suggestions from the app. But, if you don’t have credit established, you will need to start with a secured credit card. You will need to have at least $200 saved to put down as a deposit for the card. This amount will sit in a savings account as you use it as your credit limit. The bank will evaluate how you have used the card in 6-9 months. If you have used it and paid off the balance regularly, they will refund your deposit, and it will then be a “regular” card, not a secured one any longer.
When choosing a secured card, be sure there is no annual fee. Don’t worry about the interest rate because your intention with this card will be to use it only when you have the money to pay it off in full. Then you won’t get any interest charges. I also suggest you look for one with a reward system to earn some cash back for the purchases you would make anyway.
Sometimes the Discover It secured credit card is the right choice offering 1.5% cashback but offers change, so you may want to search Google for “Best Secured Credit Card” to check for any better current offers.
Suppose you are still married while you are trying to apply for a card. Include the household income on the application when filling it out. The credit card company will consider all income while you are still married.
If you have cards, remove your spouse’s name from your cards and ask him to do the same. Return the cards from his account to him and ask him to do the same. Cancel the cards in his name if he refuses to return the card.
Pull credit reports for both parties
Generally, you can pull a credit report from each credit bureau (TransUnion, Equifax, and Experian) once a year for free. From July 2020 until April 2021, you are allowed to pull these once a week to help you monitor better.
Go to annualcreditreport.com and pull one from each bureau. Try to request your spouse’s as well. Doing so will help you review accounts for both of you and check for errors simultaneously.
Place a credit freeze or credit lock on your account
If there is any reason to suspect that your spouse may try to open credit in your name or do anything to cause you issues financially, I suggest you place a credit freeze on your account if you don’t plan to make any large purchases (home or car) soon. If you think you may be buying a large item on credit, you may want to go with a Credit Lock instead.
Either of these services will keep creditors from viewing your credit to offer a loan. Credit locks or freezes will keep anyone other than you from taking out a new loan in your name.
It is easier to unlock credit than to unfreeze, but you can do either if you want to access your credit.
To place these protections, you will need to contact each of the three agencies at their website or by calling.
Secure sentimental items
Divorce can get emotional, and people can do things they regret later. Keep any sentimental items safe from harm (loss, damage, or sale) by removing them early on.
If the sentimental items carry monetary value, keep track of what you remove because it will need to be declared and included when splitting assets.
However, if the sentimental items were gifts from others to you alone, they are yours and not marital property. They are also your personal property if you specifically inherited them from a family member.
Hide these sentimental items in a storage facility, lockbox at a bank, or a friend or family member’s home.
Wrap-up of first steps
Friends, I know this can be one of the most challenging times during your life. However, these steps walk you through helpful ways to protect yourself and get and keep what is justly yours. (similar version initially published on fablifenow.com)