Divorce Experts Say: Show Me the Money
Unfortunately, many married women are oblivious to the household finances. Their husband earns a paycheck, pays the bills, handles the insurance and manages the investments.
For a woman considering or proceeding with the divorce process, this can be a real problem.
That's why I asked divorce experts to share their advice on managing the financial aspect of a divorce. Read what they had to say in the eye-opening tips below:
Tip #1: Budgeting
Figure out as early as possible what your budget is, especially the bare minimum you need to survive post-divorce. There is never as much money to go around, now that you and your ex are maintaining separate households. If alimony is an issue in your case, the best thing you can do is keep your finances organized, so the judge can see what you need for your maintenance.
Tip #2: Making Hard Financial Decisions
A soon to be ex-wife may have an emotional need to hold on to the trappings of her former married life. While this can be comforting, it may restrict her from making financial decisions that will better serve her long-term interests. A good example is the marital house. Many hold on to the house even though it might not be a good financial decision. There are other needs to consider since after age 40 retirement saving becomes a critical issue.
Most families haven’t saved enough retirement and it gets worse when assets are distributed in a divorce. Since it costs 30 to 40% more to manage two households than one, there may not be enough income to maintain the house and save for retirement. A new home chosen to meet her new life conditions and budget may be a better choice. Money received from the sale of the house can become tax deferred by using investment vehicles such as a variable annuity which now pay a much better rate of return than in the past. Even better, flexibility on the house may open new avenues for negotiating a well planned financial settlement."
Tip #3: Ignorance is not bliss – ignorance is just ignorance. And can be very expensive!
My sister moved from my parents' house to her husband's house and he was responsible for the money, while she was responsible for the home and the children. Not an unusual division of labor. However, when he was fired her life was turned upside down and she panicked because she knew nothing about their personal finances. She was forced to take control of her finances, instead of having her finances control her. The situation is no different if you are contemplating divorce, in the process of divorce or even post divorce. You need to fully understand the basics about personal finance, as well as how your values and priorities should impact your decisions. Fighting to "get the house" might be a bad decision if you get it and cannot afford to keep it – you would have been better off with more tangible cash assets.
Intimated by personal finance? Think you need to be a business major, or like math? Scared by the terminology? Get over it! My sister was a 40+ year old woman with a degree in theater arts and realized within her she had the power to not only figure out financial topics, but to take control of her life. You do, too. It is a mindset and a perspective. And you will find it not only a relief, but more importantly empowering.
Tip #4: Financial Documents
Although this is not a replacement for legal advice, there may be things you can do to better assure a fair financial settlement. Build a financial file that you maintain outside of the home. You may have a relative you trust to hold it. Or, rent a safe deposit box if necessary. You can make a copy for yourself and return the original of all documents. This can be very helpful in proving the history of assets, debts and income.
Documents to obtain: Account statements from Banks, Investments, Credit Unions, Retirement plans from current and past employers, Pension plans from current and past employers, 401K plans, Tax Sheltered Annuities, IRAs, Roths, stock options and any other assets. Also statements from all debt including mortgages, car loans, student loans, personal loans, credit cards, charge accounts, 401K loans and any other debt. Also keep a copy of Federal and State income tax returns for as many years as you can. If self-employed, federal and state business tax returns. All life insurance policies and statements. Proof of safe deposit and post office boxes. If you see documents and don't know if you need them, keep a copy. It's better to have too much than to later find you are missing something important.
A big thanks to these divorce experts for the tips they've shared!
If you're considering or proceeding through a divorce, information is key. Please take some time to educate yourself using the free information here at AlwaysNewYou.com:
- The Divorce and Remarriage Section: Great advice to guide you through your divorce, recovery and on to your next relationship (IF you want one!).
- Jeanie Rule's Divorce Advice for Moms: Our resident expert, Jeanie Rule, helps moms make great decisions about handling their divorce and raising wonderful children.