Divorce is a time of great upheaval in many ways, but don't allow the stress and emotional impact of this life-changing event to distract you from making some positive financial moves before your divorce is final. You should pay close attention to your finances now, since actions taken during the pre-divorce period will continue to affect your financial status for years to come. Read below for the five major financial moves you should be making now.
1. Make a Financial Plan.
Now is a good time to take a hard, dispassionate look at your financial picture. While a budget for the next year is certainly a key component of a good financial plan, a budget alone will only provide you with a monthly look at your bills and predicted income. Go a step further and list your debts, savings, property and investments accounts to create a complete statement of your financial affairs.
2. Think Twice About Asking for the Family Home.
Many people just automatically assume that being awarded the family home in a divorce settlement is a win, but homeownership can be a financial burden for the unprepared. Mortgage payments are only the beginning; be sure to factor in the costs of insurance, property taxes, maintenance and upkeep. It could make more financial sense to rent a home and have more money available for savings and emergencies.
3. Take a Careful Look at Property Division.
Don't be misled into valuing marital property on the basis of its cash value; be sure to look at both the tax ramifications of certain types of property as well as the income potential of property. For example, accepting the vacation home could provide you with a source of continuous income.
4. Pay Off as Much Credit Card Debt as Possible.
You and your spouse's joint credit card debt is a joint responsibility and will remain so regardless of the divorce settlement. For example, if the judge declares that your spouse is responsible for paying a certain jointly-held credit card, but fails to do so, you will be at the mercy of debt collectors and suffer the resulting dings to your credit history.
5. Use a QDRO to Your Advantage.
A Qualified Domestic Relations Order can allow you to access funds in your spouse's 401(k) without penalty, as long as the QDRO is signed and filed with the courts before the divorce is final. Rolling those funds over into your own retirement account will keep you from owing taxes on it.
Your divorce attorney should be consulted for more assistance with the above financial issues. Taking the time to carefully plan for your financial future will result in a happier and stress-free new beginning for you.
For more information, contact The Law Offices of Paul F. Moore II or a similar firm.