Going through a divorce or breakup can be a very hard time emotionally. While you will have to navigate a number of competing priorities, it is important to also consider your financial assets, goals and plan.
Assess Your Financial Situation
It is likely that your financial situation will change during this time. Some questions to consider when taking stock of your current financial situation include:
“Try to gather as much information on your marital assets and liabilities as possible. This includes statements on all retirement accounts, savings accounts, loan balances, credit card accounts, etc.,” says Susan Dewsnap CFP® Vice President and Relationship Manager at Rockland Trust’s Investment Management Group. “It’s important to note that if an account is titled to one spouse, like a retirement account, it may still be considered marital property if most of the balance was accumulated during the marriage. It would also be helpful to have a copy of your most recent tax return available to help validate that you have all of your assets listed.”
Divorce may also have tax implications. Your filing status is determined on the last day of the tax year, December 31. This means that you are considered divorced for the entire tax year if it is finalized on or before December 31. Depending on your family situation and settlement agreement, your income sources or credits and deductions may change. Consult an accountant to discuss your personal situation.
Create or Reevaluate Your Budget
After looking at your broad financial picture, create a budget to balance your expenses and income. It may help to categorize expenses to determine what is necessary to pay for and what is discretionary. While you may need to find ways to trim expenses if your income has changed, you may want to leave some funds for things you enjoy like a night out with friends.
Set New Financial Goals
Your financial goals and priorities may have changed. Keeping your budget and current income in mind, think about what you would like to achieve financially. Some goals may be saving for retirement or purchasing a new home.
“There is frequently a change in financial status post-divorce, especially when there are still dependent children in the household. The amount of income necessary to support a family in one home may not be enough to support that same family in two homes,” says Susan. “It is important to determine if the current family income is sufficient to support the post-divorce expenses before determining how to divide marital assets. In many cases, a non-working spouse may need to return to work.”
Protect Your Credit
Unfortunately, divorce can also affect your credit rating. If there are joint accounts still open and your former spouse misses payments, this can negatively impact your credit score. Reviewing your credit report frequently can help you catch any inaccuracies and contact the credit bureau immediately with any issues.
“If you have a credit card that is jointly titled, both spouses are equally responsible for the debt. If possible, close these accounts and open one in your name only. If your spouse is an authorized user on your credit card, you should notify the creditor to remove them,” says Susan.
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Update Beneficiaries
Depending on your settlement agreement, you will want to change the beneficiary on any life insurance, retirement accounts or bank accounts. At this time, you may consider reviewing any estate planning you’ve already completed and updating the name of your power of attorney, medical proxy, etc.
Talk to a Financial Professional
While you can accomplish this on your own, you may also consider talking to a financial professional to help you sort through your situation and financial goals. This person can help you create an action plan. Rockland Trust’s Investment Management Group works with people at all stages of their lives, developing strategies best suited to their unique needs. You may learn more here, www.RocklandTrust.com/Wealth&Investments.
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