Divorce can be emotionally and financially challenging, but with careful financial planning during divorce, you can navigate this difficult phase with confidence. Here are the financial strategies you need to get through this arduous time and build a secure future.
Assess Your Financial Situation
Before making any significant decisions, take the time to assess your current financial situation. You’ll want to gather all relevant financial documents, including bank statements, investment accounts, tax returns, real estate records and insurance policies. You’ll also want to create a budget that outlines your monthly expenses and income to gain insight into your financial needs post-divorce. This analysis will serve as a foundation for your financial planning during divorce efforts and help you set realistic goals for the future.
Engage a Financial Professional
Divorce can be overwhelming, and having the support of a qualified financial professional can make a substantial difference. A financial advisor can help you understand the implications of various financial decisions, such as property division, spousal support and child support arrangements. Their objective advice can empower you to make more informed choices that align with your long-term financial goals.
You’ll especially want the help of a professional for dividing assets. Property division can be one of the most complex aspects of divorce. Assets such as the family home, investments, retirement accounts and business interests may need to be evaluated and appraised. You’ll want to take a careful inventory of your assets and consider the long-term financial implications of each division as well as protect your interests by ensuring that all property division agreements are legally documented.
In case matters weren’t already complicated enough, you’ll also want to consider the tax implications associated with the division of assets. Your financial advisor can help by reviewing your situation and coming up with strategies to help minimize your tax burden.
Protecting Your Credit
Maintaining a strong credit score is crucial during and after divorce. Joint accounts and debts may still be linked to your credit history, making it essential to monitor your credit report regularly. If possible, close joint accounts or convert them to individual accounts to avoid any potential financial entanglements. By establishing a separate credit profile you can build a solid credit history independently.
Alimony and Child Support
Divorce affects not only your financial well-being but also that of any children you have. If you have children, prioritize their financial future in your planning efforts. Communication with your ex-spouse about financial matters related to your children is essential. To ensure their needs are met adequately, establish a system for sharing expenses and financial responsibilities.
If you are the recipient of child support, consider how these payments will impact your budget and financial goals. If you are the payer, ensure that your obligations are sustainable while still allowing you to maintain financial stability. The laws differ depending on your location, so make sure to understand the specific laws in your jurisdiction and work with your attorney and financial professional to negotiate fair and reasonable terms.
Revise Your Estate Plan
You should update your estate plan after any major life change, and divorce is no exception. Review and update your will, beneficiaries on retirement accounts and life insurance policies, and power of attorney documents to make sure they reflect your current wishes. You should also consider how you want your assets distributed in the event of your passing and ensure that if you have any children their future is protected through appropriate guardianship designations.
Embracing Financial Independence
The process of divorce may leave you feeling financially vulnerable and unsure about your financial decisions. Instead of succumbing to these feelings, take this as an opportunity to invest in your financial education. Familiarizing yourself with basic financial concepts, investment strategies and retirement planning can help build your financial confidence. If you’re not sure where to begin, your financial advisor can be a great resource.
An additional benefit of financial education is that it can support your journey to financial independence. Divorce often means transitioning from a dual-income household to a single-income one. As you adjust to this new reality, you’ll want to focus on building your financial independence. You may want to consider diversifying your income sources, such as by pursuing a side business or freelancing opportunities. Building financial independence will provide you with greater control over your financial future and can help you begin the next chapter of your life more confidently.
Financial Planning During Divorce: The Takeaway
Navigating divorce can be emotionally taxing, but with successful financial planning, you can lay the groundwork for a secure future. Embrace financial education and seek support from trusted advisors to make informed decisions that can lead you to financial stability and prosperity after divorce. Have more questions? Contact us today.
This commentary is for informational and educational purposes only and is not intended to be legal, investment, or tax advice. Everyone’s situation is unique so please seek professional advice from qualified tax, legal, and/or financial professionals before making any financial decisions.The information was obtained from third party resources that Carnegie Investment Counsel deems to be reliable and accurate as of the date of this publication.
Carnegie Investment Counsel (“Carnegie”) is a registered investment adviser under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply a certain level of skill or training. For a more detailed discussion about Carnegie’s investment advisory services and fees, please view our Form ADV and Form CRS by visiting: https://adviserinfo.sec.gov/firm/summary/150488