Today, one our Divorce Squad Experts, Gabrielle Seigel, is going to share some of her top priorities from managing finances through divorce for a smoother experience. Let’s hear what she has to say…
Going through a divorce is an emotional journey. Whether the divorce is amicable or not, there is a grieving process that people go through which can make the idea of dealing with finances feel overwhelming. The biggest suggestion I can provide is team up with a financial advisor. Navigating a divorce has so many layers. Typically, the people I work with don’t have the extra bandwidth of time or emotional capacity to do this on their own which is normal! And I am happy to provide more resources to anyone on this journey.
Here are my tips for getting things in order as you go through this process.
Create a budget.
Understanding your new expenses is a critical first step. Going through, in detail, your monthly income (including child support and alimony expectations) and mapping out expenses per month is the first exercise I recommend. Start this by going through credit card statements and bank statements to see all the transactions you make per month. This will bring awareness to current bills but don’t forget any changes that are going to happen in the future. As an example, filing single instead of married might change taxes every year or carrying your own health insurance can affect things as well. A good rule of thumb is the 20/60/20 rule; 20% of income is savings and investing, 60% is essential expenses, and 20% is discretionary spending.
Emergency savings fund.
The goal of cash in the bank is to have enough for an emergency savings fund and any short-term goals for the next 6-12 months. After creating the budget, you will know how much you spend per month. With an emergency savings fund ideally you have 3-6 months of living expenses in cash in the bank in the event something unexpected happens and you need to use the money. If you spend 10k per month then ideally you want to have between 30-60k in cash in the bank for emergency savings.
Check and maintain your credit score!
Any joint accounts with your ex-spouse that are not being paid on time could be negative to your credit! Make sure you are monitoring your credit score. If you have joint accounts, see if you can make them individual accounts so they are not linked to your credit score if they are your ex’s debts. You can also call the creditors to freeze your accounts to avoid hurting your score.
Beneficiaries are often overlooked through the divorce process. If you have any insurance policies or retirement accounts that have a beneficiary, make sure you are double checking to see if your ex-spouse is listed. Depending on what state you are getting divorced in there may be steps you have to take before you can officially make changes to the beneficiary. Make sure you are checking the statutes of where you live!
Help protect payments.
In the event something happens unexpectedly, make sure your divorce includes your ex-spouse having a life insurance policy that you are the beneficiary of. This will protect your ability to continue receiving child support and alimony if they pass away unexpectedly.
Create a safety net.
Protecting your income has never been more important. Now that you are an independent contributor to your financial plan, you might feel uneasy thinking about if you get sick, hurt, and unable to work for a period of time. Consider getting disability insurance to protect your paycheck in addition to the benefits you have through work.
Inventory your assets.
Not all assets are created equal. When thinking through your short-term goals and long-term financial objectives review what assets are going to serve you best – think car, house, retirement accounts etc. Remember, different assets have different tax implications.
Retitle those assets.
If you had any shared assets, make sure you retitle them! For example, a home, financial accounts, auto insurance etc. If your name was on any accounts that your ex-spouse is keeping, make sure your name is no longer on them.
Gather a trusted team.
Your lawyer, CPA, and financial advisor are going to be key components on your journey to financial independence. Make sure you pick a team that has a collaborative and comprehensive approach to make this process as smooth as possible
Thank you, Gabrielle! Some of these might have easily been overlooked and having a financial professional lay things out is definitely helpful. If you would like to talk to Gabrielle Siegel for more expert advice, reach out and set up a time to talk!
When it comes to managing finances through divorce, the more information you have the better prepared you are to take on any challenges in your post-divorce life with more ease and less stress.