• Home
  • About
  • Advertise
  • Contact
  • Policy
  • Guest Post
  • Archive

One Cent At A Time

A Personal finance blog to get rich

  • Email
  • Facebook
  • Pinterest
  • RSS
  • Twitter
  • Beautiful Life
  • Becoming Rich
  • Beginners Guide
  • Extra Income
  • Productivity
  • Saving Money

When Money Is Everything: How to Financially Prepare for Divorce

September 8, 2014 5 Comments

Share this:

  • Tweet
  • Email

One of our friends is going through divorce proceeding. The incident triggers some thoughts on financial implication of a divorce. In this post I’ll go over the financial matters that every couple going through a divorce should be familiar with.

Divorce

Divorce is emotionally exhausting experience, and a financially draining one as well. Suddenly, years of jointly earned income now needs to be split, and although it’s unlikely to deter couples who have decided to divorce, the financial implications can affect the rest of your lives. Here are some of bigger financial aspects of divorce to keep in mind.

Per Utah State University – Researchers estimate divorcing individuals would need more than a 30% increase in income, on average, to maintain the same standard of living they had prior to their divorce. About one in five women fall into poverty as a result of divorce. Three out of four divorced mothers don’t receive full payment of child support. Most men experience a loss in their standard of living in the years after a divorce, as well, a loss generally about 10%–40%, depending on circumstances. 

Financial implications of a divorce

To start with, have a financial assessment. List of your combined assets, including bank accounts, investments accounts, retirement accounts, primary home value, real estate investments, personal properties like car, etc. Try to determine what each item is worth now and what it cost when you bought it.

Also, include debts that you have. Also, note the names on all accounts, and how the title is held. With this information, your next step is to determine which assets and debts are available to be divided in the divorce, and your prenuptial agreement, if you have one, is the place to start for this.

Couples make various financial mistakes during a divorce, that adds more emotional shock to them. So be prepared and understand what it takes to have a divorce. Make sure you avoid financial disaster that many face after divorce.

The legal fees

Attorney fees can add up very quickly, due to there being not one but two legal teams at all times. Even the most amicable, do it yourself divorce can still cost over $1,500, but most divorces are not going to be all that amicable.

The more a couple fights, the more time will be spent in court, hence the importance of quality legal services. A good resource is a Certified Divorce Financial Analyst, someone who analyzes your assets and situation, and will help with the separation in a way that makes financial sense for both parties.

Finding a lawyer

While ultimately the lawyer you use is your decision, there are ways to find out if they’re the right fit for your case. For starters, the more research the better, and this starts with finding at least three potential attorneys.

This is a trying time in your life, but to them it’s a business. So if they give guarantees or brag about their high-profile clients, you might want to take a step back and reassess their qualifications. Your livelihood is at stake here, and you want to put it in the hands of someone you trust.

I’d say you communicate and resolve matters with your partner as much as possible and try to arrive at a settlement without a lawyer. You’d need a court approval on your settlement anyway, but you may avoid high lawyer fees by reaching at agreement without external influence. a mediator whom you both respect and confine with can be of immense help as well.

Remember the alimony

One financial aspect that is often overlooked is alimony, or “spousal support.” For the uninitiated, alimony is a stop-gap solution, where money is paid to the less advantageous spouse to help them during the split.

It’s also a case of how important quality legal services are, since the money paid in alimony is very subjective, differing from judge to judge. If alimony is awarded, the paying spouse could be on the hook for years and years to come.

Division of assets

Retirement account

You may need to have a QDRO (qualified domestic relations order). A QDRO is a court order that gives you right to receive all or a portion of the benefits payable under your ex spouse’s retirement plan.

This is a very sensitive subject, you must read and be prepared to face a demand or make a demand for your spouses retirement account.

Properties

Except properties that you get by inheritance or as a gift are off limits for your partner to get a hand on to. After divorce. For other properties, make sure your name is there in all titles and deeds for you to be considered as a owner during a divorce.

If you do not have a prenuptial agreement, all physical properties can be shared with your soon to be ex spouse, otherwise.

Investment Accounts

This depends on your mutual decision and court order. If you have to sell an investment, you’ll bear the loss or capital gains tax. Either way, breaking an investment account leads to devaluation of jointly help investments.

Debt

Even if a divorce decree says that all credit cards which you jointly own belong to one person, still if your ex partner fails to payoff debt then your credit will also get affected. Same is the case with mortgage.

Keep an eye on the credit card bills and if your partner opens up a new line of credit while divorce proceeding is underway.

Experts say a better strategy is to close such joint accounts after paying off the outstanding debt. At least you should closely monitor the statements.

Learn to manage finances

Managing money poorly is one of the most significant outcome of fallout of a marriage. Lack of financial knowledge often sends individuals in financial disarray after divorce.

Especially if you’re does all the financial work. After marriage you’ll be on your own and managing your finances. So better start learning about personal finance now. Without financial knowledge you will be swimming out in the ocean without life support.

Remember the taxes

If you have filed a joint return thus far, you need to now file as individual. I suggest you hiring a tax consultant to help guide you through the filing process, even if you have filed your return on your own before. Women should pay more attention to tax laws and claim all possible deductions that may apply to you.

Divorce may require you to break your investment accounts. So keep an eye on long-term capital gain taxes that you’ll have to pay. If you break your 401(k) or IRA accounts, you may have to pay penalty.

There are certain deductions that you need to consider. For example, if you require to pay alimony after a divorce you can claim that towards deduction. The partner receiving alimony, has to bear more taxes on the amount.

Above all else, keep your head up. Yes, money will be a bit tight for the future and it’s a big change in lifestyle, but with proper communication, the process can be a little less painless.

LIKE THIS POST?
I agree to have my personal information transfered to MailChimp ( more information )
Join our community of 8000+ subscribers to increase your net worth and build wealth
We hate spam. Your email address will not be sold or shared with anyone else.

Share this:

  • Tweet
  • Email
The tool that changed the way I manage my personal finance - Personal Capital, The Best Free Personal Finance Tool

Want to start a WordPress blog now? The onecentatatime.com blog is hosted by Siteground Web Hosting. For only $3.95 a month, Siteground can help you set up and host your website/blog quickly and easily.

About the Blogger Hi I am SB, a personal finance enthusiast with a career in software development. I am an immigrant to the USA since 2005, after being born and brought up in India. This 40 something technocrat lives and breathes personal finance whenever he gets time from the day job, job as a husband and a dad

Some links on this page may be affiliate links, if you make a purchase following the links, I may earn a commission. Read affiliate disclosure here
« How to Make money By Playing Video Games
Hard Cash from Soft Copy: PROs and CONs of Working at Home »

Comments

  1. Deb @ Saving the Crumbs says

    September 8, 2014 at 9:56 AM

    Important things to consider, but I pray I never have to use them!

    Reply
  2. Michelle says

    September 8, 2014 at 10:46 AM

    I like the last tip. Definitely keep your head up. That is very important!

    Reply
  3. John [email protected] Action Economics says

    September 8, 2014 at 10:57 AM

    One thing we have always done is contributed an equal amount of money to our retirement accounts (despite unequal incomes). If we were ever to part ways we would each have about the same total dollar amount in retirement accounts which would help us both avoid capital gains tax.

    Reply
  4. Richard Johnson says

    March 10, 2015 at 6:48 AM

    Choosing a right divorce lawyer for your case is very important. A good divorce lawyer is part lawyer, part psychologist and part clergy. A good divorce lawyer also is indispensable if you are contemplating a divorce (or, for lawyers, if your client is doing so).

    Reply
  5. Ellen Banks says

    June 17, 2015 at 4:23 PM

    Managing finances while going through a divorce can be incredibly difficult. Your suggestion to close joint credit card accounts is great advice. Being smart with your money during a divorce will make the situation a little better.

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.



Create your own blog in 20 minutes and $20

Personal Capital, a free tool to change your financial health today

101 Cents at a Time

101 Ways to Earn Extra Money on the Side
201 Frugal and Perfect Birthday Gifts
101 Ways to Save Money Everyday
101 Ways to be Better and Successful at Work
101 Ways to Save Environment and Energy
101 Frugal and Romantic Anniversary Ideas
101 Low-Cost Men's Fashion Ideas
101 Personal Finance Tips
101 Ways to Reuse Household Stuff
101 Things to Do, When Nothing to Do
101 College Graduation Gift Ideas
100 Tips for Ecommerce Startup
101 Ways to Enjoy Indoor During Winter

Popular Posts

Quick Cash - How to make $100 legally, in a day
Living well on less than $10,000 a Year
Top survey sites for side income
What to do when auto repair goes wrong
Where should I invest my money now?
20 Ways to be productive and happy at work
51 Ways to get out of debt
Be a better person in 15 days, 15 ways
Income ideas for retirees and senior citizens
51 side jobs for college students
Urgently need a large amount of money?
Should I buy or should I rent?
Best Personal loan providers
25 Ways to save environment
25 DIY car repairs to save money
How to decorate office cubicle
How to show your wife you care
50 Financial Rules for Success
51 Frugal weekend family activity ideas
Become Rich By Saving 1 Hour Of Daily Wage
How much do I need to save for retirement?
How to negotiate your salary

Follow us on FaceBook

About Author

SB

Blogger by choice and IT manager by profession. Finance is my passion and gardening is my greatest satisfaction. Born in India, settled in US, Husband and a father. I created this blog in 2011 with a vision to help others. Thanks for your patronage. More info on my "about" page.

View all posts


Subscribe

Join our community of 5000+ subscribers to increase net worth and build wealth

Advertisements

The Tuttle Twins coupon code

Personal Stories

How I got a new HP computer replaced
Was COVID circulating in USA in fall of 2019?
How my credit score went up 800+
Why I didn’t invest in Bitcoins
How I controlled impulses to buy things
Why this blog is named One Cent at a Time

Subscribe via Email

Site Disclaimer

Disclosure of Material Connection: Some of the links in this web site are “affiliate links.” This means if you click on the link and purchase the item, I will receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”
Read full Affiliate disclosure


One Cent at a Time is published by SB. The opinions expressed herein by him are his own and not those of his employer or anyone else. All content on One Cent at a Time is for entertainment purposes only. By reading this blog, you agree that SB and/or One Cent at a Time is not responsible for any actions taken after reading this blog. For the full disclaimer, click here .

Major Media Mention

One Cent at a Time Media Appearances

Copyright © 2021 One Cent At A Time · Designed by Nuts and Bolts Media
loading Cancel
Post was not sent - check your email addresses!
Email check failed, please try again
Sorry, your blog cannot share posts by email.