Divorce is not easy. Especially if you have been in a long-term marriage. And interestingly, we are seeing more of those long-term relationships end.
According to UBS’ Own Your Worth research :
- Divorce, for people in their 50’s, has doubled since the 1990’s
- 1 in 4 divorces are couples over 50
- Women initiate 69% of divorces
While we are all for starting over – at any age — and beginning a new life, you still need to pay the bills. You need to understand your financial situation.
So whether you’ve made the decision to end your marriage or you’re starting to ponder it, getting your finances together is key to being prepared and feeling confident.
So consider this your Confidence Checklist.
Gather the Following Documents
- Tax returns from the last three years. This is a great snapshot of your financial lives. If you don’t have copies in your house, call your accountant and ask for them. If you filed jointly, you should have access to them.
And while those tax forms are chock-full of info, there are two important lines you should look at:
- Line 11 is your Adjusted Gross Income. (It was line 8b on the 2019 form.) This is the total amount of money you brought in for the year.
- Line 15 is your Taxable Income. (It was line 11b on the 2019 form.)
This is the amount you have left to live off of after you pay Uncle Sam.
- Checking, savings (including college), and investment account statements.
Go online and access them. Then screen shot the balances. People do a lot of crazy things when they hear their spouse wants to divorce them. Draining their financial accounts often tops the list.
If you don’t have the passwords or can’t access them, then call the institutions and have hard copies mailed home and keep them.
Same goes for retirement accounts – whether its 401ks, IRA, 403bs. You may be entitled to some of this money, so you need those docs to know how much there is, plus the payout once the divorce is final. You are going to want to change your beneficiaries to anyone other than your ex-spouse.
- Loan documents. That includes your mortgage or rental agreements, car loans, student loans, credit card bills, and any other loans outstanding you may have.
- Insurance policies. Think life, health, car, and rental.
- Copies of your will, health care proxy and power of attorney. You will need to update your beneficiaries, guardians, etc. post-divorce. If you don’t have those docs, heads up – you eventually will need to create them.
Prepare a Budget
Think about a budget – I mean really think about one. Whether you’re a spreadsheet person or an app user, there are tons of options out there to help you get organized.
And then start listing ALL your expenses, before and after the divorce. Your attorney or mediator is going to ask you to do this anyway. Include things like:
- Housing /real estate taxes
- Transportation –including cars leases, gas, wear and tear, etc.
- The kids – oy…
- And don’t forget miscellaneous stuff like gym memberships or subscriptions, manicures, Netflix, etc.
This will give you a good sense of what you spend. Then my personal divorce rule is to shave 30% off your combined household income. The remaining 70% may be what’s left to split after you pay attorneys/mediators, forensic accountants if you need, etc.
Run Your Credit Report
There is nothing worse than finding out months (or years) after your divorce, that you have a credit card bill in your name that was never paid.
Actually, it’s probably a good idea to run your credit report at the beginning and end of your divorce, to ensure there are no surprises.
Finally, Watch Your Social Media Accounts
Immediately change your passwords on all the social media outlets you use. You don’t want your ex-spouse posting under your name. And be careful about bragging online about big purchases, vacations, or new dating escapades.
Don’t forget, the kids are watching too.
Getting your financial life together ASAP will not only help the divorce process, but will give you control and confidence: two things you need to begin your new life.