How will Divorce Impact me Financially?

For many, when contemplating divorce, it is only natural to focus on the emotions you may be feeling, particularly if you have been having difficulty in your marriage for some time. While this is understandable, it’s also important not to focus entirely on your emotions during this time. It’s also important to really think through the practical ways that life might change after a divorce.  For many, this means making a thorough, honest assessment of your family’s financial situation.

A simple truth in today’s society is that many middle-class families spend as much, or in some cases, even a little more than they earn each month. Living paycheck to paycheck is a reality for a large portion of our population – and if you find yourself in that situation, you are certainly not alone.  Divorce can have a significant effect on a family’s financial situation, as when a couple divorces, their expenses understandably increase.  Beyond the cost of the divorce process itself, it is important to consider the fact that during separation and after divorce, instead of maintaining one household, the family is now maintaining two.  Two mortgages, two sets of utility bills, two sets of property insurance bills- all of these things add up quickly – and though expenses have increased, the salary of each spouse often remains the same. 

While this doesn’t necessarily mean that divorce is the wrong choice for your family, it is certainly worth considering all of its implications.  It may mean downsizing to a smaller home, reducing costly leisure activities, or that a stay-at-home spouse returns to work in order to make ends meet.  Prior to deciding upon divorce, thinking these matters through is important. If you find yourself genuinely contemplating divorce, it is important to try your best to be financially savvy about the choices you make leading up to, and throughout the divorce process. Some of those steps can include:

• Tracking your income and expenses carefully.  This includes anything you might regularly spend money on – not only big expenses like your mortgage, car, or credit card payments, but also smaller, routine expenses like utility bills, activities, grocery bills, clothing, transportation expenses, child care expenses, and more. 

 

• Keeping non-routine expenses in mind as well – things like vacations, charitable contributions, home repairs, and other expenses you anticipate might arise from time to time.  Though not necessarily monthly expenses, they do add up, and are important to consider when envisioning a post-divorce budget.

 

• Beginning to collect important financial documentation.  Know what you have – both in assets, and in debt. All too often, we encounter couples in a situation where one spouse is primarily responsible for maintaining the family finances, and the other spouse is generally in the dark about important financial matters.  It is important to take steps to be well informed and to understand your finances in order to adequately prepare for the future. Documents that can be helpful to gather include:

 

1. Income tax returns;
2. Financial records (including bank statements and loan information);
3. Investment account statements;
4. Paystubs;
5. Pension plan information;
6. Information pertaining to retirement savings accounts;
7. Information pertaining to any children’s savings accounts or college funds;
8. Records of any outstanding loans;
9. Social security statements; and
10. Wills, trusts, or other legal documents that may affect your finances or are otherwise important to you.

Tracking your expenses, obtaining important financial documentation, and understanding your overall financial picture will be helpful in anticipating future expenses as you think of moving from one household to two. It could also serve as a helpful way for your attorney, and potentially a judge, to decide how best to divide assets and debts your divorce case, as well as to make important determinations on matters like alimony and child support, among others.

It should also be noted that the financial aspects of the divorce process can be among the most stressful and the most contentious. Unfortunately, it is not unheard of for one spouse, out of anger or a desire for revenge to try to hurt or control the other financially. Even though it may seem highly unlikely to you that your spouse might ever behave in these ways, it is important to keep in mind that divorce can cause people to act in very uncharacteristic ways.  Some spouses try to restrict the other spouse’s access to funds, empty bank accounts, or make expensive purchases that they would not otherwise make in an attempt to harm the other spouse.  As a result, it is important to be prepared for this possibility, and to make sure that you have adequate access to funds prior to and throughout the divorce process, should you need them. 

Even if you have not definitively made the decision to proceed with divorce, it would still be a wise step to consult with a knowledgeable and experienced divorce attorney regarding how divorce might affect your financial situation, and how you can adequately prepare financially prior to beginning the process.  If you suspect that your spouse may hide or deplete marital assets or otherwise try to control you from a financial perspective, it is important to also mention this to your attorney if you have one. 

Your attorney should be able to help advise you as to measures you can take to protect yourself financially during this time.  Some people also choose to consult with a certified divorce financial analyst.  These professionals specialize in reviewing a couple’s finances during the divorce process. A qualified analyst can help you to gain a more realistic picture of your expenses and your budget, in addition to planning for what your financial future might look like.

If you would like to speak with a family law attorney regarding separation and divorce, please contact Adkins Law to arrange a consultation. 

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