Frankly, getting divorced usually means a lot of difficulty and emotion. We can’t really help you with the emotional side of divorce, but when it comes to reducing your stress financially, we can tell you that being prepared and organized is one of the best ways to do it.
If you really want to get a fair settlement and equitably distribute your assets and liabilities between you and your spouse, being structured will keep you focused on that goal. Both of you will need to take an inventory in order to get this done, including a list of what you each own, what you each owe, and the sources of your income and living expenses as well.
The steps that we put together below can assist you in putting your financial affairs in order before your divorce. You might also consider contacting the Institute for Divorce Financial Analysts who can recommend a certified divorce financial analyst for you that will help you to gather and organize your information into what’s called a “financial affidavit”. If you use a mediator in your divorce, they will need this in order to help you.
First, your Assets. Many times during a divorce assets will somehow get lost so, as soon as possible, you should start making a list of all of the assets that you own (or think you own). These include cash, money market accounts, bank accounts, non-retirement investment accounts, retirement accounts, a real estate that you might own, any employee benefits that you might be eligible for, collectibles, sports equipment of high-value and any personal property as well.
For valuable asset information, your tax returns from previous years is quite helpful, although certain things like annuities or the cash value of a life insurance policy may not show up on them. Taking an inventory of your recent statements will give you a full picture of not just your individual but your joint assets. You also should account for assets that might not have been included in prior-year returns.
For more complicated assets, for example if you own a business, it may be a very good idea to have them professionally bound so that you will have a clear picture of what you all and can move onto the next step, figuring out what you owe.
Liabilities, in contrast to assets, will often suddenly appear during a divorce proceeding. These can include mortgages on real estate, and loans, credit card bills as well as auto loans. Reviewing your current statements will help you to determine the exact amount of money that is owed on all of them in both debts as well as outstanding loans.
Income encompasses a number of things including money that you make from your job or anything you do as a self-employed person, money you make from investments and so forth. These numbers are vital for calculating the amount of alimony and child support payments you will either have to pay or will be paid. Looking at previous tax returns is again a good idea as well as looking for differences in the income that you and your spouse earned by comparing those returns.
Determining your current as well as future Expenses after your divorce is also extremely important. In order to do this you need to review bank statements, credit card statements and even ATM withdrawals in order to figure out any spending habits and patterns that you might have. Some items are paid annually and may be overlooked when putting together a list of your expenses, so be sure to note them.
It’s also helpful to prepare a Budget with items that you will need as opposed to things that you “want”. In most divorces there will be times when compromise needs to be made and, if you have a detailed list of your expenses prepared ahead of time, making those compromises will be much easier (at least financially). You also want to make sure that the post-divorce spending plan that you create is realistic, realizing that your “standard of living” might go down once the divorce is finalized.
Finally, there is Expertise. Once you’ve put all of this information together, it’s time to also put together a professional divorce team. If it’s financially feasible, this list should include mediators, attorneys, financial professionals and possibly even therapists. The key is to have the “right” team that can properly advise you to all of the possible situations that you might encounter in your divorce, and help you to get a settlement that is fair and equitable.
One last thing to keep in mind is simply this; you might not get everything that you’re hoping for, so prepare yourself to compromise. Yes, divorce is very stressful but if you do your financial homework you will certainly be far better off and be able to navigate the divorce proceedings more objectively and, hopefully, get the equitable and fair settlement that you (and your spouse) deserve.