As the divorce process moves forward, both spouses need to be thinking about financial planning after divorce. Each person will be on their own, often for the first time in a while, and will need to reestablish their identity as a single person.
Here’s what you need to know when thinking about financial planning after divorce.
Create new, separate accounts
Many married people rely on their spouse to take care of the family financial matters. Those days are over after a divorce. Once the divorce is finalized, it is a good practice to create a new set of accounts.
As a practical matter, a former spouse could still have access to older accounts and that should be prevented.
Also, as a legal matter, accounts owned while married are generally treated as being jointly owned, so those should be officially closed at the termination of a marriage.
There are some exceptions, for example, some ex-spouses may keep a joint account for child care expenses.
Check your credit
Married couples often take on debt together. Other couples may have all their debt in one spouse’s name. As part of financial planning after divorce, a spouse should check their own credit and work on fixing any problems they see.
An account can easily go unpaid while the divorce is underway because each spouse thinks the other is handling it.
These issues should be found and fixed as early as possible.
Follow a budget
A budget is all about counting how much money is coming in versus how much is going out. A single person after a divorce is probably going to have a much different balance than they had before.
Most divorced couples find that their expenses go up, especially if they have children and now have to support two households.
Incomes can go either way. Some single people work more and make more money, others struggle with their career after separating.
Special issues for each gender (In heterosexual relationships)
Men tend to approach divorce differently than women. Just a few decades ago, men made the most money in 87% of families. That is built on a long tradition in most societies of men being the primary breadwinner. Today, 69% of couples have the man making more money.
That tends to reinforce the trend that the man should be the most financially sound one in the relationship, but at the same time in 31% of couples, the woman is carrying the lion’s share of the financial responsibilities.
This creates a challenge because many men are too proud to take money or support in a divorce. Men need to focus on their actual situation instead of what they think is “normal.”
Women, on the other hand, are objectively worse off in divorce. Women’s earnings tend to go down after a divorce, while men’s incomes tend to go up.
This is obviously not true in every case, but on average women are more likely to struggle financially after losing their husband’s income.
Long-term solutions like alimony (also called spousal support) payments are mostly a thing of the past, so women have to make sure they do well enough with their property division to get back on their feet.