There are many important things you need to organise when going through separation and divorce. One that may not be a priority, however is crucial to your current and future financial wellbeing, is your finances. The following article outlines the top seven steps to take when going through a divorce to help you get a handle of your finances through this difficult time.
By Jordan Fylonenko for womensdivorce.com.au
Every day, there is a new report about a long-term marriage ending in divorce, reminding us that everyone is susceptible to marital problems that can’t be overcome. Unlike those facing headline divorces, most people don’t have the means to financially rebound from their divorce as quickly. However, it is possible to minimise the stress of managing finances during divorce.
Here are seven divorce financial planning steps to help reduce the stress of managing finances during a divorce.
Step 1: Resolve Financial Issues
Child support, maintenance, and division of assets are all financial issues that must be resolved during divorce. To make sure this is done properly, contact a trusted and reliable lawyer. Also, some couples turn to a professional mediator who won’t take sides in the issue and will help work out a settlement that is fair and equal for both parties.
Step 2: Make a Budget
During divorce, most people will probably be running the same household with a reduced income. To help get through this, make a list of monthly expenses, including bills, child support, etc. Track all expenses – even the small ones, and then compare this to monthly income. By comparing expenditures and purchases to total income at the end of the month, it’s often easy to decide what to cut back on and how to reduce overall expenses.
Step 3: Control Debt
With the new expenses related to a divorce, controlling debt can be difficult. It’s important to keep debt during this time at minimum. For example, it is not recommended to use credit cards to make required payments. Consistently doing this may hinder one’s long-term financial health as well as the ability to provide for family.
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Step 4: Continue Paying Bills
Bills for which one is legally responsible for must be covered until financial obligations are settled in court. Arrange all bills from most to least important, and continue paying as many of these as possible. Bills that should hold the most importance are mortgage or rent, property rates/taxes, health insurance, essential utilities, credit cards, car loans, and income taxes. Consulting a financial advisor is also recommended, as they can analyse one’s financial situation and give a personalised plan of financial recovery.
Step 5: Secure Credit
A key to any financial future is a healthy credit score. Maintaining an excellent credit rating during divorce is vital, as having a strong credit score will help make financial transactions easier. To protect one’s credit, consider converting joint accounts to one name only.
Step 6: Build Credit Score
If a low credit score is a concern, don’t worry. There are many ways to repair credit. These include paying all bills on time, paying off debt, and not maxing out credit cards. To begin strengthening a credit profile, open checking and saving accounts and apply for a credit card. After a year or so of making regular payments and paying all other bills on time, apply for an installment loan (an auto loan, personal loan, or mortgage, for example). This will almost always raise a credit score.
Step 7: Plan for the Future
In the middle of a divorce, it may seem hard to plan for the immediate future, let alone years ahead. But when the time is right, take a longer-term view of the situation to ensure a solid financial future. Define financial goals. What are the plans for staying in the current house? What about retirement planning – how much has been saved? Re-examine all investments, and don’t be afraid to explore alternative career or job options. Taking the time to do this type of divorce financial planning will help immensely.
Financial Planning During a Divorce Can Make a Big Difference
Going through a divorce can be a very difficult time for everyone involved. It’s hard on the parents, the kids, and on the finances. But by taking these steps, financial difficulties can be minimised and the best can be made of a pretty bad situation.
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