Navigating Divorce: 6 Financial Planning Steps For A Secure Future
Divorce is undoubtedly one of the most challenging life events one can experience. Amidst the emotional upheaval, it’s crucial to address the practical aspects of separating your life from your partner, especially regarding finances. To help you with this process, we have developed 6 financial planning steps that you can implement to ensure a secured financial future post-divorce.
The top 6 financial planning steps to take before divorce include gathering all your vital financial documents, calculating income and expenditure, creating a budget plan, closing joint accounts, updating your will and insurance, and enlisting the aid of a financial advisor.
Ensuring future financial security should be one of the main things you consider and plan for before embarking on your divorce journey. To help you with your proactive financial planning during divorce proceedings, we will guide you through six essential steps to help you survive your divorce and emerge financially secure.
6 Financial Planning Steps To Take Pre-Divorce
Financial planning is an integral part of the divorce process. It will help ensure that your life after divorce is not wrought with economic insecurity and struggles. To help on your post-divorce financial journey, we will look at 6 financial planning steps you can take to help ensure financial stability.
1. Gather All Important Financial Documents:
Before embarking on any financial planning journey, it’s essential to have a comprehensive understanding of your current financial situation. Gather all important financial documents, including:
- All bank statements
- Investment accounts
- Tax returns
- Retirement accounts
- Debts (credit cards, loans, etc.)
- Property deeds (vacation homes, investment homes, your primary residence, etc.)
- Any prenuptial or postnuptial agreements
This step lays the foundation for informed decision-making and ensures nothing is overlooked. As you collect these vital documents, note what is in both your names, what is in your name alone, and what is in your spouse’s name.
2. Calculate All Income And Expenses:
Understanding your cash flow is paramount during a divorce. Calculate all sources of income and document your monthly expenses meticulously. This process clarifies your financial needs and aids in determining child support, spousal maintenance, and asset division. Knowing your financial baseline empowers you to make informed choices as you navigate the complexities of divorce.
3. Create A Budget For Going Forward:
Once armed with a comprehensive understanding of your income and expenses, it’s time to create a realistic budget for your post-divorce life. Consider both short-term and long-term financial goals, accounting for potential changes in housing, childcare, and other living expenses. This budget will serve as your financial roadmap, guiding you toward stability and independence.
One crucial aspect to consider is ensuring you budget for your divorce expenses. Include any lawyer’s fees, financial advisor fees, and any fees you might have to pay to the courts. Often, the costs associated with getting a divorce are not budgeted for, which can leave you in a financial bind post-divorce.
4. Close All Joint Accounts And Update Wills & Life Insurance:
Protecting your financial interests requires taking proactive steps. Close all joint accounts to prevent any unforeseen financial entanglements. Open new accounts in your name only and put all future monies received into these accounts. You can be sure that there will be expenses that you will need to pay in the future. Your new account will also help you toward independent financial security.
Additionally, update your will and life insurance beneficiaries to reflect your current circumstances. This step ensures that your assets get distributed according to your wants and that your loved ones are economically secure in the event of the unexpected.
5. Seek Financial Advice From A Professional:
One of the most beneficial steps you can take while navigating the financial complexities of divorce is to enlist the aid of an experienced financial advisor. The divorce process can be a daunting experience, and seeking professional advice is invaluable.
Consulting with a financial advisor specializing in divorce planning is the optimal choice, as they can provide personalized guidance, helping you make informed decisions that align with your long-term financial goals. The expertise of a professional can be a game-changer during this challenging time.
6. Negotiate A Fair Settlement:
Negotiating a fair settlement is the culmination of the financial planning process. Armed with a clear understanding of your financial situation, work with your financial advisor and attorney to negotiate terms that protect your interests and ensure a fair distribution of assets. Remember that compromise is often a part of the process, and flexibility can lead to a smoother resolution.
Here are a few things to remember when creating your divorce settlement agreement:
- Never agree to a settlement to get the process over with. Ensure that your settlement agreement is in tune with your needs and is fair and just.
- Ensure that you have not overlooked any future expenses, and work with your financial advisor to make sure you consider all financial aspects of your post-divorce life.
- Do not try to devalue or hide your assets during this process, as this could create more issues for you.
Why Is It Important To Plan Your Finances Before A Divorce?
Proactive financial planning before a divorce is crucial for several reasons. Firstly, it provides a sense of control during a tumultuous time, allowing you to make decisions based on careful consideration rather than emotional impulse. Secondly, it ensures that both parties understand their financial standing clearly, fostering negotiation transparency and fairness.
Lastly, effective financial planning sets the stage for a more stable and secure post-divorce future, laying the groundwork for financial independence and peace of mind.
Embarking on the divorce journey is undeniably challenging, but strategic financial planning can safeguard your economic well-being and pave the way for a brighter future. At Burnett Attorneys & Notaries, we are committed to supporting you through every step of the divorce process. Following these 6 financial planning steps will help you to survive your divorce and emerge financially empowered. If you have any questions or want to speak to one of our team members, please don’t hesitate to contact us.