Nobody enters into marriage with plans to divorce and get audited by the IRS, but it happens. Both as a divorcée and as a financial professional, I know that there are all kinds of things that can go wrong in a divorce, and they all have to do with money.
People are usually shocked by the amount of money the divorce will cost, and then devastated when they work out their post-divorce spending plan. They make a seemingly logical assumption that living costs for each spouse will be half of what they were in the marriage. Meanwhile, the cable company has no idea what you are talking about and charges you both $80 for internet. Likewise, you’re going to want a whole refrigerator, even though there are half as many people using it. You get the idea. Post-divorce life always costs more — figure 20% more — but there are ways to cover all bases and prepare yourself.
Joint Credit Cards
If you are a co-signer of a credit card with your spouse, you’re going to want to start the process of removing yourself from it. This is to avoid any sour-grapes-based spending sprees by the other spouse. The easiest way to do this is to close the card by transferring the balance to two new cards — but for more complicated situations, you will need to consult with your divorce professional.
Never Forget Your Beneficiaries
Another area that people forget are beneficiary designations. Remember when you got hired, you had to get your spouse’s Social Security number? That was likely done in order to make them a beneficiary of a brokerage account in your name. 401(k)s, IRAs, and insurance policies all have beneficiary designations that override a person’s will, and skip the probate process. Beneficiary assignments don’t change when you divorce, or when your will changes. You have to remember to change beneficiaries, or risk subsidizing a life of luxury for your ex when you’re gone.
The most obvious reason for keeping good, clean books is that it saves you heaps of money paid to your legal team. Good, accurate data can be drawn from your credit report, like any old debts that may have slipped your above-average mind 😉 What’s more, for a short time at least, your future is going to consist of assuming a mortgage and other loans — and you’ll need good credit to get the best rates. One of the best tools to do that is opening a new credit card in your own name and paying it off every month.
My last suggestion is to take advantage of the free credit reports offered by Equifax, TransUnion, and Experian.
Good record keeping is not always something that yields immediate results or satisfaction, but in time it definitely will pay off. We work closely with our clients and help them have a good feeling of what their expenses are, so they can talk to their financial advisor.
We approach running a household like running a small business. We help our clients become empowered so that they know their expenses, understand what they’re currently spending, and can accurately forecast their income. Contact us to learn how we can help you.