A newly wedded couple is too focused on building their lives to consider the prospect of a marriage ending. They look for a place to live and plan for a family. In addition to those steps, sound financial planning can prepare couples for a future, regardless of their marital status.
Proactive steps include:
- Know your possessions and balance sheet. Secure copies of real estate documents and bank, brokerage and retirement statements that verify assets, liabilities, income and expenses. The information can help negotiate a fair settlement in divorce mediation.
- Understand the tax consequences of dividing assets. Simply stated, not all dollars are equal. Assets can carry a higher proportion of taxable gains or run-of-the mill income taxes. Others are tax-free. A financial advisor can be a vital resource.
- Monitor your credit score. Free credit reports have never been more available. Before starting a new life, you need to identify debts incurred and liens filed while married. Also, remember that a soon-to-be ex-spouse can damage not only their credit, but also yours.
- Beneficiaries should match your new marital status. Reviewing estate plans is only the first step. Take a long look at retirement plans, insurance policies and other accounts that are beneficiary and contingent beneficiary-directed.
- Ensure that money needed for child support and alimony continues should your ex-spouse die or become disabled. If you are not a beneficiary on an existing policy for the duration of agreements, you can request new coverage.
- A new chapter in your life may require a new lifestyle. Divorce divides one household into two. That division includes income and investable assets. Adjusting to a lower cash flow is difficult, but manageable. Know your cash flow, understand routine transactions, budget your expenses, commit to long-term retirement savings, and manage credit card debts.
Ending a marriage may bring uncertainty. However, financial security can make an unclear, post-divorce future more clear.