No matter how amicable the divorce may be, it is still a time consuming, messy, and complicated process to see through. Not only will all property, assets, and debts need to be re-organized and amassed accordingly, but a solid financial plan for the future must be developed as well. Additionally, each spouse must learn and take the steps to figure out how to live and retire on only one paycheck.
How can I avoid financial mistakes in divorce?
When starting the next chapter of life, there are a few tips to keep in mind to make sure there is no financial ramifications moving forward.
Five tips for divorce include:
- Redo the budget: Make an honest assessment of what having one paycheck is going to look like and what can be afforded from this amount. When someone can evaluate their needs versus their wants and what they must avoid, they can avoid making costly payments concerning property.
- Know credit scores: No matter how property and debts may be divided, each person will find themselves with a credit score that may have been damaged by the split. Knowing what to expect can help rebuild a damaged credit history.
- Develop a new retirement plan: While retirement plans are divided in divorce, their projected savings may have been significantly impacted by the divorce. This will likely mean changing beneficiaries, opening up a new account, or even working later in life to collect larger benefits.
- Learn tax rules: A couple that goes from filing their taxes as married versus those that file as single are subject to a different set of tax rules. This may mean tax breaks in some instances, but in general, it is good to freshen up on the rules in order to avoid penalties.
- Consider insurance: Life insurance and other policies may be necessary even without a spouse or children. If alimony or child support payments will be made, it may be helpful to have life insurance to pull from if needed. Additionally, this change in marital status may mean insurance received from a spouse may no longer apply.
Taking some steps during a divorce can prevent a more costly surprise down the road. Divorce means a big change in life and financial circumstances, requiring a comprehensive and honest look at the financial future.