Only on an HBO series with Sarah Jessica Parker is there anything remotely comedic about divorce. ‘Til death do us part can quickly become over my dead body once a couple splits and talks of asset division begin. But in the midst of the emotional trauma (and drama), for the sake of your future, you need a financial game plan. Unless you have a prenup, you need to put the he-said, she-said on the backburner and think strategically.
And at the risk of sounding crass, it’s never too early to prepare for a divorce. You can mourn all you want once you have your financial house in order because even the best divorce lawyer won’t help you with the nuts and bolts of your post-divorce finances. Don’t assume that a settlement will leave you sitting pretty. You’ve built a life together and now you have to take control to undo it in a way that you come out with a healthy financial future. So if you’re divorcing, separating or even thinking of separating, follow these steps.
Give credit where it’s due!
Lenders, whether they be for credit cards, auto loans, mortgages or HELOC’s, don’t care if you’re divorced or not. They just want their money, so begin to shift ALL loans into single names. If you’re keeping the house, move the loan to your name. Your husband bought a new car a year ago? Make sure the car loan is in his name alone. Any contract or loan with both names must be changed to reflect one responsible party. There are no joint loans post-divorce.
Don’t forget the ties that bind
Of course, when there are children involved, not everything can be a clean break. In order to avoid confusion or debates in the future, make a list of every financial responsibility you and your ex will have to share in the future. And “the future” lasts until your youngest child enters (or graduates, depending on your agreement) college, yes, that’s right. So think beyond college tuition … there are many steps along the way to get there: braces, school trips, sports equipment, tutoring, and transportation to name a few. Oh and don’t forget the therapy they might need to deal with your split.
Take your vitamins
Divorce is stressful, so take care of yourself and your children by making sure all of you have health insurance. Once you’re divorced you cannot continue on your spouse’s plan. COBRA is available for up to three years but it’s expensive. If you anticipate that your healthcare premiums will be difficult for you to handle on your own, make sure support for that gets written into the divorce settlement for a period long enough that you can ensure that you will be able to cover them on your own. This should be your mantra: If it’s not in the agreement, it’s on your dime.
Look into the crystal ball
Once you have a draft agreement in place, think ahead to future when you’re living on your income, whatever alimony and child support you may get and any other income you expect (rental property, trust, etc.). With the list of expenses that you’ll be solely responsible for, as well as whatever other responsibilities you have, sketch out a monthly cash flow. Are you left with enough money to cover all expenses and continue to save each month? You may marry again, but you may not, so your retirement is in your hands alone now.
Follow the golden rule (of financial planning)
Always spend less than you earn! Ideally, your financial picture may look not so bad in a settlement. But alimony doesn’t last forever, so use whatever cash excess you have the end of each month to save and prepare yourself for your future.