If you are divorcing, you've probably heard your share of "divorce horror" stories over the years and some of them may have you concerned about how the divorce will impact important aspects of your life. You may be worried about your children's happiness, and possibly worried that the divorce will ruin your credit or leave a significant dent in your savings.
Unfortunately, some, if not all of the divorce horror stories you heard may be true, but more often than not, these negative experiences can be avoided when the divorcing spouses: do their research, retain competent divorce attorneys, agree to work together to obtain an amicable divorce, and make the "right" financial choices throughout the divorce process.
We cannot ignore the fact that divorce has a way of making rational people make irrational decisions; it's common because divorce is a highly-emotional experience, especially because it involves children and hard-earned assets, both of which are sensitive subjects for most people.
With the above in mind, when you go into your divorce, you want to do it calmly and rationally, you don't want your financial decisions to be dictated by emotions since the consequences of those decisions may be long-lasting, if not irreversible.
Here are a few basic financial tips to follow during a divorce:
- Don't hide assets from your spouse. The judge will find out anyway and any such activity will be frowned upon by the court. Your divorce settlement could be affected.
- Order a copy of your credit report so you know exactly what accounts are in your name, which accounts are joint, and how much you owe in total.
- Close all joint credit card accounts, or convert them so they are in one spouse's name only. This way, your spouse can't continue running up credit card debt.
- Do a post-divorce budget now so you know how much money you will need to pay your monthly obligations.
- Don't rely too much on the promise of spousal support, which is not guaranteed. Start thinking of ways to become financially independent if you aren't already.
- Understand that spousal support is tax deductible for the paying spouse and taxed as income for the receiving spouse.
- If you can afford to, pay off all marital debt before the divorce is finalized. This way, you can make a clean break.
- If you own a home and it has equity, you may want to consider selling the home and splitting the proceeds. Often, this is the best financial way to handle a marital home.
- If you want to keep the marital home, make sure you can refinance the mortgage in your name alone and you can afford the maintenance involved. If you cannot qualify using your income alone, you'll have to look at Plan B.
- If you are a high-net-worth couple, you should consider hiring a financial advisor during your divorce.
- Divorce mediation and collaborative divorce are far more cost-effective than a contentious or litigated divorce. With these divorces, the goal is to preserve as much of the marital estate as possible so the divorce costs are minimized and the assets are protected.
These are some basic financial tips during divorce. To learn more about having a financially successful divorce, contact our San Diego divorce law firm today!