Getting a Divorce: Tips on How to Prepare
Billy Peterson, CFP®, CDFA™
Whether you have been contemplating divorce for quite a while or a sudden event triggered it, you will be much better off in the long run if you follow some essential advice before rushing through the process.
First and foremost it’s critical to set emotions aside. No matter what feelings you have, there is no benefit to anyone if those emotions override your ability to think logically and work on your current situation- just as an ER doctor deals with trauma through patience, discipline and the assistance of trained professionals that work alongside him.
Here are 8 largely unknown tips that will help improve your outcome:
- Consider your priorities for what you really want out of the divorce? Write down what needs you have as well as your spouse’s needs.Are you prepared to give up certain things? Once again, don’t let emotions take the lead in setting your negotiations. Although you may feel comfortable in the marital home, it may not be the best asset for you to settle on if it causes financial hardship due to the mortgage payments, upkeep and taxes.
- Make photo copies of all financial assets and liabilities. These will include 401k statements, brokerage accounts, pension plan statements, mortgage and vehicle loan balances. Don’t forget insurance statements (life, health, and property), social security benefits, and all bank accounts. Make an inventory of all personal household assets as well.
- Contact all credit card companies and discuss splitting each into separate accounts. This will allow you to track who is spending what and potentially eliminate any future obligation if a spouse makes purchases that were not agreed upon. Keep a copy of all credit card statements and work on eliminating outstanding balances and avoid future credit card spending.
- Find a local Certified Divorce Financial Analyst and begin creating a plan to get your new life on track. Divorce is expensive so plan on spending some money for the right advice. Don’t figure you can make all the critical settlement decisions on your own and don’t seek financial advice from an attorney. The attorney’s job is to help you manage through the legal aspects of the divorce process. She/he is most likely not an expert in determining the most beneficial settlement options for your long-term financial stability.
- Create a monthly and annual income/expense budget. You will need this to help support your case for alimony (also known as maintenance), child support and property division. Ask your spouse to prepare one as well. Your financial advisor will use these budgets to help project future cash flows for each spouse and create a more equitable scenario for each of you.
- If possible, discuss a collaborative divorce with your spouse. This contractual process binds each party to the process of settling the marriage in a mutually agreed on format without the use of attorneys. The idea is to work together with mediators and financial professionals to come up with an agreement that is most beneficial to both spouses and their children. If collaboration is not an option, seek out a local family law attorney who is willing to work closely with a Financial Planner with experience handling divorces.
- If there are children involved realize that they didn’t ask for this. Understand that they will likely want to keep good relations with both of you. Put yourself in their shoes. Would you want one of your parents bad mouthing or trying to turn you against the other? Come up with a custody or visitation plan with their interest in mind from the get go. Sit down and talk to them often. Let them know that you are working on all of the details of your new life and they are a big part of your decisions.
- If alimony or child support will need to be paid to you, discuss the merits of having your spouse purchase a life insurance policy naming you as owner and beneficiary. If your spouse dies, all future income and child support will cease. Having a life insurance policy on him or her will ensure that you have some type of income replacement.