Sue had been considering divorce for some time, but it was the beginning of the New Year when she finally decided to move ahead. She hadn’t wanted to taint the holidays, and her husband always received a substantial bonus after year end which she wanted to participate in, plus she didn’t really understand how the whole thing worked from a tax perspective.
There are many folks like Sue, which may explain why the legal community calls January “divorce month.” January sees more divorce filings than any other month.
If you’re considering filing for a divorce, what are some of the things you should or should not do, from a financial perspective?
1) Collect all statements from all sources before using the D word. How much do you owe, how much do you own? Where are all your assets? What assets are all yours, partly yours, or not yours? What might be separate property, perhaps because of inheritance or some other reason?
2) Avoid “retail therapy.” When stress runs high, where do you turn to for relief? For many, the answer is the mall. This will only compound your long term troubles. Do yourself a favor and find a different outlet. Ask a friend to help.
3) Listen to the right people. At this time, you will find advice from all corners. Who will you listen to? Be slow to implement what you are told by well-meaning friends and confidants. Perhaps ask friends who have been through the experience about professionals they hired to help them through the process, then schedule an appointment with those professionals. If you think your divorce will be amicable, you might choose mediation. If not, you might consider a family law attorney. Ask for referrals from someone who was satisfied with the outcome.
4) Once you know what and where all family assets are, think about what a settlement might look like. It’s common for women to want to keep the family home. This often does not work out well. Why? Because homes do not generate cash flow. Even with significant equity in the home, funds to buy groceries can run low quickly. Think about alternatives that you can live with.
The single most common mistake I see women make when divorcing? Being too willing to give up their rightful due because “they just want out.” While emotions are running high, it feels like the right thing to do, just to “get away from that man.” But five years later, when the money has run low, and times are tough, these same women often say, “I wish I hadn’t been so hasty.” Even though you may want nothing more than to just be out of the relationship, think longer term. Many women find themselves in serious financial trouble just a few years after the divorce and sometimes it could have been avoided with just a little more patience. Not easy, I know, but necessary.
The reality of divorce, whether you’re wealthy or just making it, is that two households are now going to have to survive on what one household has been living on. While the situation you find yourself in now may be difficult, even impossible, there are significant challenges that come after divorce. Do your best to prepare for it.