If divorce is on the horizon, don't wait a single day to review your finances. Doing so will give you a clear idea of where you stand right now, as well as the changes you may face in the near future.
Regardless of your situation, going through a divorce will impact your finances in some way. This is why it's critical to prepare as far in advance as possible. Here are five things you can do:
- Open individual accounts: You don't want to use joint accounts any longer, as doing so will add more challenges to your divorce case. Open your own bank account and credit card account to keep your finances separate. Also, make sure joint accounts are closed so that your soon-to-be ex-spouse doesn't run up debt that you may be responsible for.
- Gather all your financial records: This typically includes bank statements, retirement account statements, pay stubs, life insurance policy information and anything else associated with your finances.
- Create a debt and asset checklist: By listing out your debts and assets, you'll have a clear idea of what you'll need to work through in your divorce. Also, make note of which assets are separate property and which ones are marital. The other person may not agree, but you must know your stance.
- Review your credit report: You don't want to make any big purchases during your divorce, but you may find yourself spending some money once the process comes to an end. For example, if you're interested in buying your own home, your credit score will have a lot to say about how you move forward.
- Create a budget: With your household income and expenses changing, a budget can keep you on track during this difficult time. Be reasonable with the numbers you use, as you don't want to give yourself a false sense of security.
A divorce has the potential to steal all your energy, which often leads to a situation in which you don't focus enough time on your finances.
If you're facing the divorce process, a thorough financial review is a must. Once you do this, you'll have more confidence in your ability to efficiently move through your divorce. You won't receive every asset, but having a plan sets you up to negotiate from a position of power.