Divorce can be a devastating financial event. Families are often forced to support two households with the same income they previously supported only one. While the recession forced some couples to stay married, for financial reasons, when they may have otherwise divorced, the improving economy is now allowing more couples to consider divorce. Increasing retirement account, higher home prices and the improving labor market and again giving people the confidence and freedom to divorce, if that is what they choose.
In order to minimize any financial setbacks that a divorce may cause, it is important to plan the divorce, rather than beginning the process for emotional reasons. Begin making a complete inventory of your assets. Make copies of all bank account statements, retirement accounts statements and credit card statements. Make copies of your tax returns, life insurance policies and obtain a copy of your credit report to make sure you are aware of any liabilities in your name or in your spouse’s name.
Make sure you know where are of your income is going before filing for a divorce and prepare a monthly budget of what your expenses will be after the divorce. Most people underestimate their monthly living expenses so it’s important to know exactly what they are so you don’t have any financial surprises after divorce. Once the household finances are divided, you may find that some expenses may be reduced, while others increase. One expense that is likely to increase is health care, so make sure you know how much your health care will be after divorce, whether through your spouse’s COBRA, or through the state insurance exchange.
Most important, save as much cash as you can leading up to the divorce and have as much available credit on your credit cards as possible in the case of an emergency. A divorce will no doubt leave you financially devastated, but with the proper planning, the damage may be mitigated and the recovery smoother.