Getting your affairs in order is the first critical step toward having a successful end to your marriage. Unfortunately, many people become quickly overwhelmed at the sheer volume of tasks they must accomplish before divorce. Here is a short guide to some of the first financial steps you need to take.
1) Gather All Pertinent Documentation
You will need to have a clear picture of your marital finances. To accurately portray your financial situation, it helps to have clear documentation of the lifestyle you and your spouse had together. Before you head to any appointments with an attorney or other members of your divorce team, ensure that you have copies of some of these important documents: (For more, see: How to Manage Your Finances Through a Divorce.)
- Tax documents
- Home and mortgage information
- Loan applications
- Bank statements
- Credit card statements
- Investment account statements
- Retirement savings account information
2) Take Inventory of Your Marital Possessions
Take a good look at the assets you and your spouse own jointly, which can include homes, cars, art and collectibles. When taking inventory of your marital assets, don’t forget to consider retirement savings accounts, investment accounts, and other various types of property. You should also know the overall income that you and your spouse brought into the household each year. For example, tax documents should help prove the annual income levels for the year.
Having a good inventory of your marital possessions and assets is crucial for getting what you are entitled to. It is difficult to negotiate a settlement without information regarding what to divide up or sell. Even the most effective mediator or divorce attorney will not be able to get you a fair settlement without understanding the full financial picture of your marriage.
3) Prepare for the Cost of Divorce
Divorce can be very expensive. You will need funds to pay for an effective team, which will do their best to assist you in managing the process and securing a financial future for yourself. Before you even consider filing for divorce, you may want to think about setting aside some cash on your own. This money can then be used to cover the cost of retaining an attorney, hiring a certified divorce financial analyst, and enlisting the help of a therapist to work through your own emotional issues surrounding the end of your marriage. (For more, see: Get Through Divorce With Your Finances Intact.)
4) Set Up New Bank Accounts
You may not be able to get rid of your old joint accounts just yet, but you can certainly begin to set up new accounts for your soon-to-be single life. Make sure that you form these new bank accounts and that you transfer some funds into the account. Most notably, you will want to switch any direct deposits from your employer into your individual account.
You should also consider opening new credit card accounts that are only in your name. This tactic can help you build up your own credit for the time when you may need to purchase a new car, get a new mortgage on your own, or encounter any number of other scenarios that require a good credit score. Your credit score will need to reflect that you have the capability to responsibly borrow and repay your loans without the assistance of your spouse.
5) Get Acquainted With Your Credit Report
Taking charge of your credit is a crucial element to securing your future financial freedom. Good credit is a standard requirement for everything from personal loans to mortgages.
You are entitled to one free credit report each year, which can easily be obtained online. Become familiar with the items that are included in your reports, and keep an eye out for unfamiliar loans and transactions. You are responsible for any account that has your name on it, even if it is shared with your spouse. Identifying accounts early can help to manage your debts post divorce.
Preparing in Advance Saves Money Later
While there are no fixed rules regarding the timing of completing these five necessary tasks, it is better to finish them sooner rather than later. If your affairs are in order prior to filing for divorce, your spouse cannot make it more difficult to obtain copies of the documentation you desperately need. In the case of a narcissistic or bullying spouse, you may find it incredibly hard to gain access to records that you need once the divorce process has been set in motion.
Without all your information and affairs in order, you may not be able to negotiate a settlement that is fair or that helps secure your financial future. If you follow through on the completion of these five essential steps, it can make a huge difference in the overall outcome of your divorce settlement. (For more, see: Divorce Planning Checklist: What You Need to Know.)