Getting your finances in order is an integral part of the divorce process, as legal fees for a divorce can accumulate quickly, and the total expense is not always predictable. Unfortunately, many people fail to comprehend the potential financial consequences of a divorce until it is too late and are not prepared as a result.
Financial experts agree it can be a difficult lesson to learn and can negatively impact your financial health and well-being going forward. To help you come out of the divorce in the strongest financial position possible, you will have to learn some ways of avoiding the financial pitfalls you may encounter during the process.
The most crucial step in avoiding the financial pitfalls of divorce is having a financial expert on your team. It is common for many divorcees to rely solely on their family law attorney during the divorce process. Still, a qualified financial expert can address the complex economic issues arising from the division of businesses, pensions and retirement plans, stock portfolios, stock options, and real estate and help handle any personal and financial matters with the foresight and attention necessary.
After a divorce, income levels may fluctuate, and it may take years to recover. One great way to manage your finances is by keeping track of your spending. You can do this by creating a reasonable livable budget. According to the U.S. News & World Report, it’s critical to make sure your budget doesn’t rely on finances that aren’t presently available, such as tax refunds, to cover the costs. A budget for the entire year can help you manage your finances and plan for any unexpected divorce expenses, as well as make sure your spending stays under control. Outline your monthly costs and how you’ll pay for them and remember to consider inflation and taxes.
Once you have started keeping track of your spending, it may be a good idea to create an emergency fund while going through your divorce. The process often takes up most peoples’ savings, leaving them with little to fall back on. To avoid this, you can start saving little by little, as your finances allow. Financial experts recommend saving enough to cover at least three to six months of expenses, but the more you can save, the more well off you will be post-divorce. But before deciding to set up an emergency fund, pay off any outstanding debt first.
According to the Women’s Institute for Financial Education, another way to avoid the financial pitfalls of divorce is by understanding your assets. In many marriages, not everyone plays an equal role in managing the family finances, but you must know all the facts. Forbes found that those going through a divorce tend to focus on the significant assets, such as the house and the retirement accounts, and often overlook other valuable assets. By educating yourself on the true nature of your shared and individual assets as early as possible in the divorce, you can ensure a smoother process.
Regardless of whether you choose to seek the advice of a financial expert during the divorce process, it is always a good idea to know how to avoid the common pitfalls in your case. The best way to prevent them is by hiring an experienced attorney who will protect your interests and help you come out of the divorce financially secure.
The Schoenberg Family Law Group, P.C., offers the San Francisco Bay Area more than 35 years of experience counseling clients in all aspects of marital dissolution and legal separation proceedings. They will thoroughly explain all issues related to your dissolution to ensure that your rights are protected and the final dissolution judgment is both equitable and fair.
By Debra Schoenberg