Last year a survey of people in a relationship or partnership conducted by SunTrust Bank found that finances are the leading cause of stress in a relationship. So what do you do when that stress leads to divorce? And how do you move forward and recover financially?
Moving Forward Financially After Divorce
“Money really touches everything. It impacts people’s lives,” said Emmet Burns, brand marketing director for SunTrust.
The end of a marriage is riddled with questions. How are you emotionally going to move forward from this? When are you going to see the kids? How often are you going to see the kids? Where are you going to live? How are you going to pay rent? Do you need to get another job? Do you need to see if your job will give you a raise? Who is taking what car? What are you going to do during the holidays? Will your kids need to change schools? How are you going to pay the utilities in addition to your kids after school dance lessons?
There are so many questions, and so few answers at the beginning. While an attorney can definitely help you when it comes to child support decisions, and custody agreements, you might want to consider also working with a financial expert. You will need to protect yourself not only emotionally as well as on a “family level,” meaning standing up for your rights as a parent, but also at a financial level. Here are some suggestions for the financial side.
Budget for Moving Forward
According to certified divorce financial analyst Eva Sachs, the first step toward finding your own financial independence is to balance your income with your expenses. Figure out how much money is coming in (via work, alimony, and/or child support) and then see how much is going out and being spent on living expenses.
“Think of it as a spending plan rather than a budget,” says Sachs. “Knowing where your money goes is key, especially after divorce. There will be many new expenses you might not have thought about prior to your divorce; this is a critical time to refrain from spending money you don’t have.”
Update Your Beneficiaries
Emily McBurney, attorney and qualified domestic relations orders (QDRO) expert, says the top of your to-do list should include updating the beneficiary that is listed on your life insurance and retirement accounts. It makes sense that during your marriage your spouse was listed as your beneficiary, but now that might not make sense. Until you remove he or her name they will remain on there.
“Review all of your accounts and insurance policies and change the beneficiaries. A divorce does not automatically terminate your former spouse’s rights to be the beneficiary on your retirement plans, bank accounts, and life insurance policies –- even though your divorce decree might say that your former spouse has waived all rights to the benefits,” she says. “You will need to formally submit a change of beneficiary form to each financial institution. Otherwise, the benefit will be paid to whoever is listed on their forms at the time of your death — regardless of your divorce.”
Update Your Will
Since you’re already updating your beneficiary designations, don’t forget to revise your will, according to certified divorce financial analyst Donna Cheswick.
“Meet with an attorney to discuss your state’s laws regarding possible updates to your will, power of attorney and advanced directives,” Cheswick advises. “You want to be sure that your former spouse is no longer entitled to any distribution in the event of your death. And if your settlement agreement requires one party to maintain life insurance on the other, then there needs to be a method in place to be sure this is actually occurring. Just because the former spouse says they will do something, doesn’t mean that they are following through.”
Plan for Emergencies
In a marriage, you rely on your spouse when you lose your job, face a medical emergency, or run into an unplanned home expense. But if something happens now, after your marriage, you’re going to need to go it alone. In order to protect yourself, Sachs advises you create an emergency fund. You should add to this fund whenever you are able to. Additionally, doing this also adds to your emotional well-being. There’s a satisfaction in knowing that you can stand on your own two feet if anything goes wrong.
“An emergency fund should equal three to six months of your living expenses,” she says. “If you can swing it, I recommend six months because you’re now single and need an even bigger cushion if you are not able to work or an emergency occurs.”
Review Divorce Documents and Transfer Assets
According to Cheswick, even after the divorce is finalized, your work may not be complete unless you’ve ensured all the assets awarded during the settlement have actually been distributed. You will need to double check and then triple check this, as so many things can go unnoticed and unrecorded during the course of a divorce. This means checking your credit score often and reviewing all bank statements.
“I can’t tell you the number of people who will contact me months (and unfortunately even years) after their divorce is finalized and there are still outstanding items which have not been resolved,” she says. “Remember that the agreement is a legally binding contract that you both signed and agreed to uphold. If one party is failing to comply with the terms of the contract then the other party has every right to take steps to ensure their compliance including going back to court to have the agreement enforced.”
Work with a Financial Professional
It may seem like working with a divorce financial professional such as a certified divorce planner might be too much when it comes to your finances, according to McBurney, they can help you sort through the complexities of the end of your marriage and set you on the right path going forward financially.
“Most financial mistakes that people make during and after divorce could easily have been avoided if they had sought professional assistance,” she says. “Financial planners can help you figure out how to live within your new financial realities post-divorce and develop strategies for building back your financial security. And tax advisors and CPAs can help you avoid making expensive (and very common!) tax mistakes (related to things like asset transfers, retirement, spousal and child support).”
Once the divorce is almost finalized, Sachs suggests taking a look at your future and looking at ways to maximize your retirement savings. Work with a financial planner to decide what the next course of action would be for you to take. What are the best ways for you to save for your future?
“Don’t let divorce stop you from planning for your future,” she said, “Investing in your 401K plan will allow you to save for retirement. You can begin by saving a small amount each week and then let it build slowly or make payroll contributions that match your employer contributions. Don’t stop thinking of the future!”
Breathe Deeply and Change Your Perspective
If money issues were a big problem during your marriage, then take this as a opportunity to right all the things that might have been wrong. This is a chance for you to not only start over with a new life, but also with a new financial life. If money was easy during your divorce, don’t take this as the end of that. You will be able to find solid financial footing on your own. It might just take little tweaks to what you were doing before. Regardless of what type of situation you are coming from, this is a chance to take the reigns of your finances and make money work for you.
Working with an Attorney to Move Forward
Divorce can be overwhelming for so many reasons, not just emotionally, but also financially. A financial planner will be able to help you, but when it comes to deciding on a settlement for the rest, you will want to work with an attorney like the ones at the Law Offices of Korol and Velen, Certified Family Law Specialists. If you are facing a divorce, you should work with a Los Angeles attorney that will take a vested interest in your specific situation and advise you on what you might face in a divorce regarding property division, child support and custody, and alimony. They will be able to advise you on your options. An attorney will provide support and guidance as you work towards ending your marriage.
For advice on divorce, you need the expert law firm of Law Offices of Korol and Velen, Certified Family Law Specialists. Contact us today.