Friday, August 18, 2017

5 Ways to Manage Your Finances During A Divorce

Photo by Freddie Collins on Unsplash
Divorce is not only a devastating experience for families, but it can be a costly one as well. The average cost of divorce in the U.S. ranges from $15,000 to $20,000, and the majority goes to divorce lawyers’ fees. 

Apart from legal fees, there are also alimony payments, the division of assets, and possible taxes, and costs can go even higher. For your peace of mind and to get your life back on track, it’s important to find ways to manage your finances and pay the bills during a divorce.

Common financial issues of divorce

There are several financial issues that need to be resolved during a divorce. First is the division of property, and both you and your ex will have to come to an agreement over who gets which items. Another is the division of debt. 

Often, this issue is one of the most difficult things to resolve as couples can find it hard to determine who is responsible for certain debts incurred during the marriage. You’ll also need to agree on tax issues such as who gets to claim Head of Household status or who gets tax exemption for dependents once you’re divorced. 

Divorce itself can be emotionally stressful, but it’s imperative to take concrete steps to resolve these financial issues during this trying time. Here are 5 ways to manage your finances during a divorce.

Consult with a reputable divorce attorney

Consulting with an experienced divorce attorney can provide you with the financial guidance that you need during this challenging time. 

Even if you are in good terms with your soon-to-be ex, you will need a lawyer to help you avoid making typical financial mistakes during a divorce. Moreover, your lawyer can help you in case a financial dispute arises.

Create a new budget

You will need to figure out how much income you should make for you to live on your own. To do this, list down your expenses, utility bills, credit card bills, investments, tax records, family life insurance policies, and the like. 

Determine which items you and your ex can pay off during your divorce and pay your debts. You should also make sure that your ex pays the bills that he or she promises to pay.

Open your own personal credit card

During the divorce, Katherine Grier, PC advises that you close any joint accounts to avoid financial disputes and problems from coming up. This way, you and your ex can work on paying only the debts that you incurred during your marriage. After you close your joint accounts, you should open your own personal credit card or other lines of credit.

Monitor your credit score

During your divorce, it’s likely that your credit scores will drop as you close accounts and make other changes in your finances. Check if any mistakes were made by a creditor which contributed to your lower credit score or if there’s any debt on certain accounts that were incurred without your knowledge.

Be prepared to make a lifestyle change

Now that your income will be drastically different, it’s important to be prepared for a lifestyle change during your divorce. Keep in mind that divorce will bring in new expenses and you will no longer be sharing household overhead costs with another person. It’s also important to talk to your children about the lifestyle changes that may take place during this time.

Divorce is tough enough without having to worry about your finances, but it’s one of the major hurdles that you have to get through to get your life back on track. Remember to consult your lawyer, keep track of debts and expenses, and be ready to make a few lifestyle adjustments to manage your finances well during your divorce.

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