What you need to do to protect your financial future
Divorce impacts everything in your life. Everything.
Your living situation, your security, your self-esteem and certainly your personal finances. Most people generally have no idea where to begin to protect their personal finances when going through a divorce. No matter how prepared most people think they are, THEY are not equipped to deal with the enormity of the anger, sadness and grief that surrounds this major life change. And if you have children, the situation can seem even more overwhelming.
We are sorry that this is happening to you and realize that knowing what you should be doing to protect your finances can be daunting.
Harmoney Financial is here to help coach you through the steps that will protect your financial future. Money is almost always a point of contention in divorces and in all cases the divorce will affect your personal finances AND SECURITY.
To protect yourself and begin financial security, Harmoney has put together the following critical things you must undertake to protect yourself:
Sever all unnecessary financial ties with spouse.
Your divorce decree may mandate child support, alimony, or life insurance on one of THE SPOUSES for the benefit of the other and/or THE CHILD/children. Other than these requirements, you must separate all your finances from your spouse to eliminate any future liability. Cancel any joint credit cards and get in writing who is responsible for paying off the balances. You should also pursue attaining new credit in your name only. In addition to credit cards, all of your assets/loans such as property, automobiles, etc. should also be separated and assigned to one spouse or the other. THE named party for each of these should be the only spouse listed as the owner of these assets. Have your attorney or mediator assist you with this retitling process.
Update your beneficiary forms.
The person you name on your retirement account beneficiary form receives the assets. Please UPDATE this form to whomever you now choose. Also, please change the beneficiary on any life insurance policies you may have to the person you now WISH to receive ANY future benefits. Have your company benefits department and/or your insurance agent help you with this process.
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Review your personal finances.
This may be the toughest item. Please put together a budget and determine what income you will need each month to pay all your current bills. You must live within your means - NOT by using credit cards/home equity loans. Please adjust your income(higher)/expenses(lower) accordingly. Next, determine all your financial goals and set a plan to meet them. You should also consider the following items and make sure your budget accounts for these expenses:
- An emergency fund to handle any unforeseen expenses (recommend 3-6 months of living expenses)
- Education
- Retirement account
- Pay-off credit cards/loans account
- Any goals that you would like to attain - new home, new car, vacation, etc. The best way to reach any goal is by placing some money toward your goals EACH month automatically (small amounts count!)
Review your tax situation.
Last thing you need is an unexpected tax liability due the following April 15th with the filing of your tax return. Do a tax projection based on your new filing status (single or head-of-household) including income and expenses only, AND adjust your tax withholdings accordingly. Have your tax preparer do this calculation for you.
Check your credit report.
Now would be a good time to update your credit report. Please review it for any mistakes and take action to correct this very important document so it reflects your personal credit. While you are doing this, protect yourself from identity theft by getting this inexpensive protection (REMOVE IF BUDGET ALLOWS - THE COST OF DEALING WITH IT AFTER IS WAY TOO MUCH - SHOULD BE MANDATORY)
Click here for your personal credit report/identity theft. ->
Review your life insurance.
We spoke earlier of updating the beneficiary form on your policy so these monies go to whomever you now choose. What may be more important is to verify that you have the proper amount of life insurance if something were to happen to you prematurely; are there ADEQUATE funds to take care of your children and family? Contact your insurance agent and verify that you have sufficient coverage given your current circumstances.
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Get educated with your finances.
The more educated you are about financial matters, the more in charge of your life you will feel. Listen to our Harrnoney Financial Hour Radio Show live weekly on a station in your city or at any time at our web site. Better educated = Better decisions = PEACE of mind.
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TITLING ON ACCOUNTS
Once married, (NOT BEFORE), you may want to officially give access to your assets to your spouse (All State's have laws governing this). Each different financial institution has their own form/documents; simply request the documents, complete and return to the financial institution. Most accounts can be re-titled to joint tenant with right of survivorship - this means that in the event of one spouse's death, the asset passes to the remaining spouse. Bank accounts, real estate, property (automobiles, boats, etc.), credit cards, investment accounts are all examples of what can be re-titled. Again, any and all of these can be re-titled or remain in each individual spouses name.
* A financial planner may be essential
The single parent family is a fact of life today.
According to 2002 figures provided by the U.S. Census Bureau, of the 72 million children under age 18 in the United States, 28% (19.8 million) live with one parent. We believe these numbers WILL ONLY INCREASE. Please follow the above actions and insure yourself and your family a financial future - you'll sleep better with each step taken!
Here are a few related articles that you may be interested in:
How Divorcing Spouses Hide Assets
Besides shifting assets out of joint accounts, there are many creative ways to keep money out of the hands of a spouse?some legal and some not. What to watch out for?
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Secrets to a Fair Divorce
Why do some people receive equitable divorce settlements while others get the short end of the stick? The answer lies in the ability to keep emotions in check. Based on my legal experience and interviews with hundreds of judges for my book, here are secrets to getting your fair share?
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Avoid the costly tax missteps of divorce
When a marriage is on the rocks, most Americans know they need a good divorce lawyer. Far fewer know they also need good tax counsel.
Many people assume a divorce is a tax-free event. Under Federal tax law [Code Section 1041], they are technically right - the splitting up of assets is tax free. But all too often, the trap has been baited for future tax liabilities.
View article
Marriage and Divorce
"I hear from many separated, divorced, and divorcing people whose ex-spouse has intentionally wrecked their credit." - Ilyce R. Glink, author of 100 Questions You Should Ask About Your Personal Finances
Credit agencies separate individual credit from joint credit, so as long as you have your own income, you can have your own credit history--even if you take your husband's last name. When creditors make reports, they are required by law to report information on joint accounts in both of the individual's names.
View article
Paying for College after a Divorce
College planning after divorce: The financial data of the parent with whom the child lives more than 50% of the time must be entered on the Free Application for Federal Student Aid (FAFSA) form.
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