Taking Control of Your Finances After a Divorce

Divorce is usually an emotionally and financially challenging process, even when the proceedings are amicable. You need to take stock of your financial reality during and after the divorce. A reputable divorce attorney can help you gain a clear understanding of your assets, liabilities, income, and expenses.

The first thing you need to do is understand your net worth. You can calculate it by subtracting your total liabilities from your total assets. This figure provides a snapshot of your overall financial health and helps you understand where you stand financially after the divorce.

Here are the additional key steps that can help you take control of your finances following a divorce:

Inventory Your Assets

Begin by listing all your assets. These include both tangible and intangible items such as:

• Bank Accounts: Savings and checking accounts.
• Investments: Stocks, bonds, mutual funds, retirement accounts: 401(k), IRA, and so on.
• Real Estate: Homes, rental properties, land.
• Vehicles: Cars, motorcycles, boats.
• Personal Property: Jewelry, electronics, valuable collections.
• Other Assets: Business interests, life insurance policies with cash value, annuities.

Identify Your Liabilities

Next, catalog all your liabilities. These are debts and financial obligations, including:

• Mortgages: Remaining balances on home loans.
• Auto Loans: Outstanding car payments.
• Credit Card Debt: Balances on credit cards.
• Student Loans: Any remaining student debt.
• Personal Loans: Loans from banks or private lenders.
• Other Debts: Medical bills, tax liabilities, alimony or child support payments.

Track Your Expenses

Document your monthly expenses to understand your spending patterns. Divide these into categories:

• Fixed Expenses: Rent/mortgage, car payments, insurance premiums, utility bills.
• Variable Expenses: Groceries, dining out, entertainment, clothing.
• Discretionary Spending: Hobbies, vacations, non-essential shopping.
• Debt Payments: Credit card payments, loan repayments.
• Savings and Investments: Contributions to savings accounts, investment accounts, retirement funds.

Review Financial Documents

Gather and review important financial documents to ensure you have a comprehensive understanding. These documents include:

• Bank Statements: Monthly statements for all accounts.
• Investment Statements: Quarterly or annual statements from brokerage firms.
• Loan Statements: Current balances and payment schedules for all loans.
• Tax Returns: Past few years of tax returns to understand income history and tax liabilities.
• Insurance Policies: Life, health, auto, and home insurance policies.

Close Joint Accounts

You need to close any joint accounts you held with your ex-spouse. This includes:

• Bank Accounts: If you had joint checking or savings accounts, you need to close these to prevent future disputes or unauthorized access. Open new accounts in your name to ensure complete control over your finances.
• Credit Cards: Joint credit card accounts should also be closed to prevent future charges from being made. Request that the credit card company transfers any remaining balance to an account solely in your name.

Update Beneficiaries

Ensure that the beneficiaries listed on your financial accounts and policies reflect your current wishes. Update beneficiaries for:

• Life Insurance Policies: Change the beneficiary designation to a new person if your ex-spouse was previously listed.
• Retirement Accounts: Update the beneficiaries on 401(k)s, IRAs, and other retirement accounts.
• Investment Accounts: Ensure that any investment or brokerage accounts have the correct beneficiaries.

Protect Your Credit

Take steps to protect your credit during and after the transition:

• Monitor Your Credit Report: Regularly check your credit report for any discrepancies or unauthorized activities. You can get a free report annually from each of the major credit bureaus (Equifax, Experian, and TransUnion).
• Freeze Your Credit: Consider placing a credit freeze if you are concerned about identity theft or unauthorized access to your credit.

Separate Debts

Work on separating any joint debts and ensuring that each party is responsible for their fair share:

• Negotiate with Creditors: Contact creditors to divide joint debts and transfer balances to individual accounts.
• Document Agreements: Ensure that any agreements regarding debt responsibility are documented in the divorce decree or a separate legal agreement.

Update Legal Documents

Make sure all legal documents reflect your new financial situation:

• Will and Estate Plans: Update your will, trusts, and any other estate planning documents to reflect changes in beneficiaries and asset distribution.
• Power of Attorney: If your ex-spouse was previously named as your power of attorney, appoint a new trusted individual.

Build an Emergency Fund

An emergency fund is vital for financial security. Aim to save at least three to six months’ worth of living expenses. This fund will provide a safety net in case of unexpected expenses or financial setbacks.

• Automatic Savings: Set up automatic transfers to a dedicated savings account to build your emergency fund consistently.
• Liquid Assets: Keep your emergency fund in a liquid account, such as a high-yield savings account, to ensure you can access the money quickly when needed.

Plan for Retirement

Retirement planning is a critical component of your long-term financial strategy. Ensure you are on track to meet your retirement goals.

• Review Retirement Accounts: If you divided retirement accounts during the divorce, review your balances and make necessary adjustments to your retirement plan.
• Contribute Regularly: Maximize contributions to your 401(k), IRA, or other retirement accounts. Take advantage of employer matching contributions if available.
• Diversify Investments: Ensure your retirement portfolio is diversified to balance risk and reward. Consider consulting a financial advisor to optimize your investment strategy.

Speak to an Experienced and Resourceful Family Law Attorney in Virginia

Divorce can leave you in a financial mess. At the Pack Law Group, our compassionate yet assertive family law attorneys focus on helping clients achieve a fair and equitable divorce that protects their financial needs. Our lawyers can help you secure a stable future by taking care of everything from asset division and spousal support to child custody arrangements. Schedule a consultation today. Call us at 540-586-7225 or reach us online.