In my experience, it takes months for a woman to go from thinking about a divorce to actually informing their spouse that they’re planning on getting one. Sometimes years. It’s an extremely hard decision to make, with more factors to weigh than probably any other decision in your life.
That’s why I’m always impressed with the women I meet who’ve made that choice. I know how much concentration and focus you’ve put towards this, and you deserve all the credit in the world for getting to this point.
One of the factors that a woman considering divorce certainly needs to think about is the financial aspects of it. The good news is, while you are going through the decision making process, before you’ve even come to a final conclusion, there are preparations you can make.
The truth is that most of these moves make sense even if you aren’t divorcing. They all involve taking greater control of the family finances and gaining a better understanding of the cash-flow situation in your home. So even if you ultimately decide not to divorce, you’ve made some positive headway in your own financial independence.
Here are the financial moves you absolutely should take while you’re thinking of divorce.
1. Get your hands on the financial documents
The first thing you should do is get copies of all of the important financial documents for your family. These can include:
- Bank statements
- Retirement accounts
- Brokerage and investment statements
- Mortgages
- Tax returns for a at least 3 of the most recent years
- Year-end statements for credit cards
These documents will help you understand the big picture of how much money and assets your family has right now. The value found in the house and the retirement funds can be particularly surprising because many people don’t look at how much they’ve appreciated all that often.
Once you have these documents, make copies of them and put them in a safe place. Perhaps you can lock them in a drawer or safe deposit box, or leave them with a friend. You will use these later when you start working with a Certified Divorce Financial Planner to create a Lifestyle Analysis.
2. Start keeping an eye on spending
It’s also a good idea to get access to the corresponding online banking and credit card portals for all your accounts. As you know, finances can change a lot on a monthly basis, especially the credit cards and checking accounts that are used almost every day. Now is the time to get a better idea of just how much you’re spending on yourself and your kids.
You should also start to understand how much your spouse is spending. In addition to his regular spending, you’re going to want to make sure your spouse isn’t spending inappropriately. Perhaps he is siphoning off money for himself without telling you, or buying items for himself (or someone else) to get back at you.
Even if you don’t think your spouse has it in them to be so underhanded, I still think it’s a good idea to keep an eye on that.
3. Declare independence, with your credit report
Many wives have joint credit cards and bank accounts with their husbands. While this is normal, this can actually bring down your credit score. Now that you are preparing for life without your spouse, you should prepare your credit score for it as well. That means establishing credit in your own name and building a credit report that is as strong as possible.
Establishing credit can be pretty easy. I recommend that you get a credit card in your own name as soon as you can, use it and make sure you pay it back in full and on time. If you can put any other accounts in your name, like car or utility payments, that will help your credit score as well–just make sure you keep paying them on time.
Now is also a good time to establish your own bank account to give you a place to keep money that is separate from your spouse.
Next, request a credit report from one of the three credit reporting agencies–Experian, Equifax, or Transunion–and take a good look at it. Make sure that their information lines up with your understanding of your accounts and debts. If you see any issues with any of your accounts, reach out to those companies and find out how to fix them.
Finally, figure out what your credit score is currently. You can usually do this through your banking portal, or you can check AnnualCreditReport.com. If it needs to be improved, talk to your Certified Divorce Financial Advisor about ways to fix it.
4. Get the money you need for professional services
You’ve probably heard that divorce isn’t cheap, and that can definitely be true. But not every divorce is exactly the same and it’s possible that your divorce will be less expensive than most. However you approach the divorce process, you do need to figure out how you’re going to pay for your lawyers, CDFA and other professional services that you’ll rely on.
This can be a problem if you and your spouse share access to all family funds, and even harder if your spouse has full control over the family money. If you make money on your own, consider putting it into your own personal bank account, rather than the shared account. You may also consider taking out loans from friends or family.
As part of this process, you should probably hold off on making any major purchases for the time being.
5. Order a Lifestyle Analysis
I consider this to be the most important move you can make in the early stages of the divorce process. For someone considering separating from their spouse and splitting up their family home, there is just so much you don’t know. It’s perfectly natural for you to get overwhelmed by confusion and uncertainty when faced with all of these decisions and options.
A lifestyle analysis, also known as a cash flow analysis, provides some necessary certainty around the issue that probably is bothering you the most–money.
This is a service that a CDFA like myself can offer. We’d look at your current income levels for the whole family, as well as expenses. Then we’d look at what your income will look like post-separation, and figure out how your expenses will change as well. This is one of the major reasons it’s so important to obtain all the financial documents so early in the process, as we’ll need as much information as we can get our hands on to figure this out.
6. Decide what really matters to you
This final financial move may seem obvious–and it might not seem like a financial move. But I think that this one is among the most important choices you can make, and it is often overlooked.
So what do I mean by deciding what really matters to you? I mean to ask yourself what you’d like to get out of the divorce process, financially speaking. I often will ask my clients to picture what they’d like their life to look like post-divorce. Because once you have that picture in your mind, you can focus on the financial aspects that will get you there.
Perhaps you want to stay in the family home. Perhaps you’d like to continue in your current employment situation, or make a change. Once you have that goal in mind, you can figure out what the financial picture will need to look like in order to get you there.
I strongly recommend that you avoid the opposite approach–where every asset becomes a fight between you and your spouse. I’ve seen this too often, and it usually boils down to the divorcing couple fighting to see who can inflict more pain or score more points. In my experience, that’s a counterproductive approach that leaves everyone unhappy.
Put yourself in a better starting position
No matter what you end up deciding, making these financial moves now will help you understand your financial situation better and put you in more control. Getting your financial information organized will help you over the next few months, and allow the professionals working on your behalf to give you better counsel.
More importantly, in my mind, is that when you make these financial moves, you are taking control of your situation. That is a feeling that will serve you well in the days ahead.
Image credit: Photo by Marek Levák on Unsplash
