Financially Surviving Divorce
by Jennifer Delcamp
Dealing with divorce can be one of the most life-altering, emotionally scarring, tumultuous times in your life. When the primary relationship in your life is ending, the last thing you want to worry about is money.
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Even though you may hope that divorce is something you never have to face, itís smart to start planning ahead if youíre being plagued by marital problems. Itís always best to plan for the worst while hoping for the best. Here are a few things that every person who may have to go through a divorce needs to know:
Joint Credit Card Accounts: If you and your spouse have joint debts, try to get those paid off or split them equitably into individual accounts. Even though the divorce decree may state that one spouse is responsible for paying that debt, the credit card company still views it as a joint debt until itís paid off. If the responsible party makes payments late, it will negatively affect the other personís credit, too.
In the midst of a bitter divorce itís startling what one person may do to the other out of spite. I have had clients whose credit was severely damaged because their spouse was supposed to repay the debt and didnít. Itís best to close any joint accounts to prohibit additional charges as soon as divorce looks like an option.
Mortgages: If you have a lot of equity in your home, it may be necessary to sell it. This will usually free up some extra funds to help you start over. However, it may be very important to one spouse to stay in the home. If this happens, itís best if that spouse can refinance the home in their name only.
If this isnít possible, the spouse who isnít staying in the home will usually be asked to sign a Quit Claim Deed. This is a form that gives up rights to the property. It is important to know that it may not relieve that spouse of the debt obligation. Again, it can negatively affect their credit if the other spouse does not pay the mortgage.
Establish credit: If you have relied on your spouseís credit in the past, itís a good idea to apply for individual credit cards. This will help you begin to build your own positive credit history instead of being dependent one someone elseís.
Set up a budget: Creating a budget is probably the most important thing you can do to relieve some of the stress associated with major life changes. Figure your new income based on your individual income, projected child support and alimony payments. Subtract expected living expenses. Be sure to include setting some money aside for periodic expenses such as home and car repairs. Having a realistic idea of how much extra money you will have can be very comforting.
Keep a Calendar: Write down your paydays and all of the due dates of your bills when they come in. This will help you stay organized and know exactly when payments are due. In order to stay ahead, it may be helpful to pay everything on payday that will be due before the next payday. If you find yourself with all of the bills due at the same time of the month, some creditors may allow you to move due dates.
Checking and Savings Accounts: In order to start separating the finances, set up individual checking and savings accounts. Move any automatic deposits or withdrawals to the new account. If you werenít the one who usually handled the finances, itís good practice to start balancing the checkbook and find out exactly where you stand financially. Reviewing a credit report is a great start to find out exactly who is owed and how much. Start saving money for unexpected expenses.
Insurance and Other Assets: Itís a good idea to change beneficiaries on any insurance policies and in your will. Assets will usually be divided in the divorce but itís important to know about how much money is at stake and to be aware of the different assets to which you may have a right.
Even though divorce can be a very difficult transition, planning ahead financially can relieve a lot of anxiety. Itís much easier to move ahead if you take away some of the uncertainty of the future. It may be hard to think about your future alone, especially if youíre hoping for reconciliation. Regardless, if you look out for yourself by planning ahead, youíll be better prepared if things donít work out.
If youíre one of the lucky couples who do end up back together, it never hurts to begin again with both spouses being financially savvy.
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Copyright © 2003 by Jennifer Delcamp
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