Divorce is hard enough. It’s emotional, kids may be involved, and– let’s not forget– your finances or the financial world is most likely torn to shreds. When you are most vulnerable, it can be tough to protect yourself and unravel the mess. Go through the following divorce financial tips to ensure nothing slips through the cracks, and once you have completed it, you’ll have financial peace of mind and be able to sleep like a baby.
It’s not uncommon for people to feel overwhelmed or confused about how to handle financial matters following a divorce, according to Christopher Dukes, president and CEO of Dukes Wealth Management Inc. based in Culver City, CA. “Getting back on track can be stressful.” In an effort to help you start recovering financially, Duke suggests taking four vital steps:
1. Figure out your budget.
“Budgeting is the foundation of wise money management,” says Dukes. “Basically, it’s a plan for where your money will go based on what you have coming in.” The first step is to list your current income and expenses. You can use an online budgeting worksheet such as this selection of free printable budget planning templates.
2. Build your own credit.
Married people frequently take out credit together, says Dukes. “However, as part of the divorce, you may have closed or been removed from joint accounts. If you no longer have credit cards or other types of credit, it’s a good idea to establish your own credit history.”
Dukes says there a few ways you can establish credit. “In general, a credit card is the easiest type of credit to get. However, if you currently have no credit or a poor credit history, even getting a regular credit card could be difficult. Luckily, a regular credit card is not your only option. You can also apply for a secured credit card.”
A secured credit card requires a cash collateral deposit that becomes the credit line for that account. So, if you put $1000 in the account; you can charge up to $1000. You may be able to add to the deposit for additional credit, or sometimes a bank will reward you for good payment and increase your credit line without requesting additional deposits.
3. Pay off any debts.
As part of the divorce process, you’ll determine who will pay off what debt. If you’re responsible for some of the accounts, you may be worried about your ability to make payments. After all, going through a divorce does not leave most people flush with cash. “If this is the case, it’s a good idea to contact your creditors immediately,” recommends Dukes. “Many creditors are willing to work with consumers experiencing hardship and allow them to make lower payments temporarily.”
4. Update important documents.
It’s important to plan for the future, says Dukes. Many people name spouses as heirs in wills and as beneficiaries on life insurance policies and retirement accounts. If you died tomorrow, who would inherit your estate? Who would get the proceeds from your retirement plan and/or life insurance policy? If you were incapacitated, who would have the legal right to make medical and financial decisions for you? “If you named your ex-spouse, you may need to make a call to your lawyer and insurance company,” advises Dukes.
You should also review real estate titles, auto titles and other such documents to remove names of spouses who no longer own the property after the property division is final.
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