I am excited to share tips with you regarding finances. I am not an accountant, attorney, CPA, or any of those other letters of the alphabet. But I have experienced divorce, and some of these lessons I learned the hard way, and share this information with you to help you prepare for your future.
Facing the truths of financial changes is unsettling. If you are fortunate enough to have a good career and disposable income, you could face the challenge of being sued for spousal support. Or you could be the one in need of support. I will not address child support in this post, because no matter who has the children, the children need financial resources for survival.
The first item on the list is, ignoring the opportunity to respond to any court documents. When you receive a notice of divorce proceedings, read the papers, and get a professional to help you prepare a response. Fear and anger are your worst enemy right now. Take the time to address the matter and respond. Ignoring the opportunity can create many legal challenges on the other side of the process.
Budget and budget again. Expenses have a way of surprising us. The things that you forget to include are the very items that can take your accounts into overdraft. Review your bank statements and take a hard look at those items that you have had on auto-draft for years and forgotten. What about the makeup subscription box, or the clothing kit, don't forget to include or eliminate the expense in your budget. Plan for costs on the high side, you don't want to get shocked by surprises.
Your future is changing, and your retirement plans need evaluation now. The preparations you made in the past may not be sufficient. First, if you have not started an account for retirement, now is the time to do so. You may have been a stay at home parent for years, but now you need to look out for your future. If you already have a plan, look at the beneficiary you have listed and make sure the information is current and correct. Talk with a financial planner and develop a goal to get you to where you need to be for a comfortable retirement. Tip - Schedule a review every year.
Pay attention to the debts and what is left for you to pay. Even though you reached an agreement on who keeps what, make sure you get your name off of those accounts. If your ex defaults on a joint account, the creditors will call you for payment.
Avoid retail therapy; it will cost you more than its worth. Emotional shopping can wreck your credit, devastate your budget, and leave you with regret. Yes, change is wanted, and it does make you feel better, but exercise caution. If you must shop, check the sales, sell some of your unwanted items and use those funds to purchase new clothes.
Don't fail to get health, life, and auto insurance in your name. Life happens, and planning for success is more beneficial than making up for mistakes. Even if your former spouse has offered to pay for your insurance, think proactively. If they lose their job, you lose your coverage. Don't leave things to chance, take control, and get covered.
You may find that you have to cash out your 401K to keep things afloat. Look at all other options first because withdrawing from your retirement funds comes with huge consequences. The penalties for the early withdrawal are high, and if you decide you must use those resources, talk to an accountant first. Paying taxes, interest, and penalties is a huge financial mistake.
Keeping joint accounts after divorce can lead you down a rabbit hole. I always like to look at every situation from the perspective of ten years in the future. I mean what reason is there for keeping a joint account, what needs to have your name attached, why should you be held accountable for potential overdrafts. Open an account in your name only and put your funds in it and become the responsible party for your future.
Don't avoid calls from creditors, call them first. Explain what is happening and work out a repayment plan that you can afford. Avoiding calls from creditors does not make the bill go away. Face the issue as an adult; work out a plan, planning will help save your credit score. It will take some time to get back on track with your credit, but the work will be worth the effort.
Remember, the Internal Revenue Service (IRS) is the boss. If you filed taxes together, you would have to file them again at least once. The Internal Revenue Service is not an agency to hide from or ignore. Talk to a specialist about how you should set your funds up for the future. Keep your tax records for the next few years just in case something comes up. Check the IRS website to find out what the requirements are for keeping records.
Get the names on vehicles changed. Some states allow you to petition the court to have your name changed before the divorce is final. Changing your name is a power move, and getting the vehicle paperwork changed in advance is such a relief. Consider this; you will not have to find your former spouse to obtain their signature to sell the car or to trade it for a new vehicle.
All the items listed are a small sample of things to consider when looking at your finances after divorce. From beginning to end, you control the outcome of your future, and your future can be brighter than ever.