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Finances After Separation

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If you’ve decided to divorce or if you’ve already separated from your spouse, it’s time to take a hard look at your finances. You want to be both smart and proactive about it because if you ignore money, you could make some costly financial mistakes. Now, let’s do what’s right and avoid that!

Each couple has a unique set of financial circumstances and considerations; no two are identical. In this article, we are going to examine the topic of finances after separation and begin the process of planning for your post-divorce financial future.

The first priority is to know how much you have and what you owe so you can accurately assess your financial situation. We’re talking about calculating your marital assets and the totality of your debts.

Determining Assets

  • How much cash do you have total in all bank accounts combined?
  • How much do you and your spouse have in retirement dollars (401ks, IRAs)?
  • What is your house worth?
  • What are your real estate assets worth?
  • What is your combined annual income?
  • What is your annual income?
  • What are your other assets worth?

Calculating Debts

  • What is your total credit card debt (for you and your spouse)?
  • What is the loan balance on your mortgage?
  • How much medical debt do you and your spouse have?
  • Do you have any personal loans?
  • What is the balance of your auto loans?
  • What else do you owe?

Now, go ahead and total your assets and liabilities as a married couple because you’re not divorced yet. Then, calculate your personal income and debts you’ll likely be liable for after the divorce, just so you have an idea of where you stand. But be aware that your divorce settlement may change your financial responsibilities.

Your Marriage & Family Are Unique

Every marriage and family is unique. Your marriage is unique in many ways, such as the number of children you have and their ages, the length of your marriage, whether you and your spouse both work, the family’s combined annual income, how you and your spouse manage money, whether you own a home or rent, and whether you own or lease your vehicles. Also, in whether you and your spouse have a pension, IRA, or 401k that’s subject to division in the divorce.

When looking at your finances, you’ll want to consider:

  • What is my annual income?
  • Where will I live?
  • Will I pay child or spousal support?
  • Will I receive child or spousal support?
  • How much will my housing cost be?
  • What will be my utilities?
  • How much do I owe in credit cards?
  • What will be our children’s expenses?
  • Will my current employment pay me enough?
  • Will I need to gain or improve my job skills?

How Did You Manage Finances Before the Separation?

How a couple manages their finances is unique to each marriage. If you were our client, we’d ask you a series of questions: Did you have a family budget and if so, what was it like? Did you and your spouse consult each other before committing to a major expense? Did one spouse pay all the bills? Did one spouse do all the spending for the household?

If any of these sound familiar, you want to pay close attention to money during the separation process:

  • “I can’t believe you put a $300 vacuum on a credit card when we can’t afford it.”
  • “I thought you paid the bills two weeks ago!”
  • “If you want Amy to have braces, you have to get a job.”
  • “Where is the $100 you withdrew from the ATM yesterday?”
  • “What did you spend at the mall today?”
  • “We can’t afford you to drop $100 at the bar!”
  • “Why should I pay for you to live in a four-bedroom house when I have to sleep on my buddy’s couch?”
  • “Your other kids always came first.”

Your New Role Managing Finances

We all have different attitudes toward money. Some people hoard it and barely spend a thing, while others spend it freely. Some people count every dollar that comes in and goes out, while others put little attention on it. When spouses have polar opposite attitudes and behaviors when it comes to money, it can create a lot of tension in the relationship.

Regardless of your attitude about money during the marriage, you’re going to cultivate and develop a different one as a single individual. You may still be thrifty, spendy, or somewhere in between, but one thing will change – now you’ll be all on your own.

These are your priorities:

  • “I have enough income to pay all of my bills.”
  • “I have enough left over to put some in savings.”
  • “I keep my checkbook balanced.”
  • “I pay all of my bills on time.”

If the above does not apply to you for any reason, or if you’re afraid you won’t have enough money for the above to be true, it’s time to focus on how you’re going to increase your income. What will it take? Do you need to go back to school, work toward a promotion, gain job skills, switch careers or jobs? In other words, if something is broken (financially), it needs to be fixed and you don’t want to delay in finding solutions.

Are there any aspects about your financial life that causes you discomfort, or perhaps even shame? Here are some typical examples:

  • I buy things I can’t afford and put them on credit cards too regularly.
  • I’m bad about paying my bills on time.
  • I eat out every day and I spend way too much.
  • My debt is spiraling out of control.
  • I have trouble spending money I don’t have.
  • I buy “things” I don’t need instead of investing in myself and my financial future.

If there are areas of your money life that make you uncomfortable, we recommend being honest with yourself and adopting new, healthy habits and behaviors to replace the poor ones. You can also start educating yourself on finances by getting some books at the library or Amazon – self-education is a great way to start unless you prefer to reach out to a financial advisor, who can help navigate you to a brighter financial future.

Related: Becoming Financially Independent After Divorce

Contact Claery & Hammond, LLP for divorce services in the Greater Los Angeles Area.


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