Divorce, though sometimes inevitable, comes with many consequences. Divorce often leaves both parties financially devastated. So, what divorce financial preparations can you do if you’re in the midst of divorce proceedings or if you’re considering divorce?
The following post is by MPFJ staff writer, Laurie Blank. Laurie is a wife, mother to 4 and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom and to a simpler, more peaceful life.
Divorce, though sometimes inevitable, comes with many consequences. There are emotional consequences, such as going through the process of adjusting to a changing family structure. There are the “physical” consequences of moving to a new home and sharing custody of children and pets. There is the tedious work of dividing up the “stuff”. And then, there are the financial consequences.
Divorce often leaves both parties financially devastated. This article says the average cost of a contested divorce can exceed $50,000 at times.And that’s not to mention the fact that a divorced person will often be living on a much lower income than they did when they were married.
So, how can you prepare yourself financially if you’re in the midst of divorce proceedings or if you’re considering divorce? Here are some tips.
Get a Clear Picture of Your Current Financial State (and Your Spouse’s if Possible)
It’s important when a divorce is on the horizon to know exactly where you both stand financially. How much consumer debt do you both have? Mortgage debt? How much equity is in the home?
What is each person’s income? Retirement savings balance? What are the non-retirement savings and investment balances?
Make a spreadsheet detailing all account names, numbers, and balances. Knowing the total financial picture of each person involved will help you prepare for options related to divvying up assets and liabilities.
Consider All of the Legal Options
Not all divorces have to be expensive. There are options available that can cost considerably less than a standard contestable divorce.
For instance, a Pro Se divorce consists of both parties representing themselves. Many states have the papers available online for spouses to print out.
While most legal professionals do advise against this type of divorce, it can be a viable option for spouses who agree on all of the issues. If you trust your spouse, and he/she trusts you, you can go the Pro Se route pretty cheap – often $500 or less.
A typical contested divorce, however, will result in hourly attorneys’ fees for both parties. It’s not uncommon for divorce attorneys to charge $100, $250 or more per hour for handling details and phone calls regarding divorce.
And by the way, that 20-minute phone call you had with your divorce attorney often counts as an hour of work on their books.
The bottom line here is to consider and research all legal options for ending your marriage before deciding on which legal route best suits your situation.
Tighten Up Your Belt
Fiscal frugality is extra important if you’ll be going through a divorce soon. Unless you and your soon-to-be-ex have an endless amount of cash, lawyer fees and costs for lifestyle changes will definitely have an impact on your bank account.
Use this time to take a serious look at your income and expenses as a couple. Now, make a mock budget based on who will get what expenses after the divorce – and how much income you’ll each have after the divorce.
Be sure to include all of those “little” expenses such as salon trips, clothing, and entertainment expenses. If you’re not already tracking monthly expenses, try and go through past bank statements and credit card statements. Do your best to make a list of what you’ve spent the last several months.
Will you still be able to afford to live the same lifestyle after your divorce as you do now? If not, where can you cut costs?
Will you have to find cheaper housing or down-size your automobile? Go through each expense you have and determine if it’s a want or a need. Find out where you can cut costs and how you can save more as well.
You may find that you have to become much more frugal to afford your post-divorce lifestyle. Or, if your spouse is a big spender you might actually have more money post-divorce.
Knowing where you’ll stand financially after the divorce – and creating a post-divorce budget – will help you have a better idea of how to create a steady financial situation after the divorce.
And if you use this time to be extra frugal and save as much as you can, you’ll have an extra financial cushion to make the transition to a lower income easier.
Work Together with Your Soon-to-be-Ex if You Can
Divorce is never pleasant, but the more amicable you can be with your soon-to-be-ex, the better everyone will feel. Try to take the high road and avoid bad-mouthing him or her – especially around the kids.
Treat him or her with respect and be willing to compromise on the issues if possible. That being said, it’s vital to stand strong on things that are important to you too.
Be thoughtful about every decision and take your time before deciding, if possible. Try not to make decisions based on emotion. Instead, try to make decisions based on what’s best for all involved.
The more peaceful the divorce proceedings are, the easier it will be for everyone to get along in the future, and the easier recovery from the whole process will be.
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