There are many challenges that come with being a single parent in California—logistical, emotional and, of course, financial. While it is natural to focus on the financial well-being of your child during divorce, you also need to think about your own financial future when it comes to property division.
Spouses are entitled to the money in retirement accounts and pension plans when they divorce, and these assets should not be ignored when dividing marital assets. While it may be tempting to use money in a retirement account for other purposes, it is best to leave that money alone as the taxes and penalties for withdrawing the money early can cut the balance in half.
Financial experts often suggest that single parents use a money management technique referred to as “bucket budgeting,” in which four different accounts are maintained. The first account should be used for living expenses or recurring bills; things that child support payments and/or alimony are intended to cover. The second account should be a retirement account. Another account should be used for emergency purposes and the final account can be used for discretionary spending. This technique can help single parents—especially custodial parents—prioritize their short- and long-term financial goals for the children as well as themselves.
Plan Before Divorce
The time to think about financial planning is not after a divorce, but rather during a divorce. It is typically a good idea to hire a divorce attorney to help you valuate all of your marital assets, including retirement accounts, and negotiate an equitable division.
For advice on divorce and all it’s aspects, you need the expert law firm of Korol and Velen, certified family law specialists. Schedule a consultation today.