One of the biggest challenges people face as they go through a divorce is failing to understand their financial situation. In most relationships, one partner is usually the “driver” when it comes to financial decisions. After divorce may be the first time a spouse becomes the decision maker for their financial future. It is important to be realistic with your expectations about what happens after the divorce is finalized and what you expect to receive.
Here are five things to consider and understand before finalizing your divorce:
- Think about your priorities. Do you want to stay in your home, pay for your kids to go to college, or go back to school yourself to increase your earning potential? What about retirement – are you putting money away so you can retire at age 65? A divorce may make some of those goals impractical, so you need to identify the most crucial – and then figure out how to fund them.
- Understand what your responsibilities could be. Will you be required to pay alimony or child support? For how long could that requirement last: a few years, or forever?
- Do your homework and learn what your and your spouse’s current financial situation is. Obtain copies of all your financial records, employee benefit information, life insurance, credit reports, mortgage information, and Social Security benefits (CPP and OAS in Canada).
- Make a budget. You need to understand what your expenses and obligations will be once you’re on your own so that you can start planning how to meet them on a weekly, monthly, and annual basis.
- Consult a financial professional. A financial professional who specializes in divorce issues can give you an objective, emotion-free assessment of your financial outlook before your make any decisions or sign any agreement.
Divorce is never easy, but the most successful ones are those that are done with as much objectivity and as little emotion as possible. Taking the steps outlined in this article can help safeguard against making emotional decisions – which will help ensure that you don’t sacrifice something you absolutely need to get something you merely want.
Laurie E. Ingwersen (CFP®, CRPC®, CDFA™) is Vice President, Wealth Management, of The Harvest Group in Wellesley, MA. For more than 40 years, The Harvest Group has been dedicated to helping families achieve their financial and lifestyle goals while providing exceptional service, communication, and advanced wealth-management solutions. www.ubs.com/team/theharvestgroup.