It is difficult emotionally and financially to go through a divorce. Due to the legal ramifications, emotional stress, and psychological effects of the dissolution of marriage, people may neglect to take critical steps that will ensure their own financial well-being.
During such a time of upheaval, some details can go unnoticed. Financial advisors may be able to aid, but they must understand what they’re dealing with. Even though it might take a little time to realize the consequences of ignoring vital factors surrounding finances, the long-term effects could be catastrophic.
Due to the uniqueness of each divorce, you can only get specific advice from specialists intimately familiar with your case. Nonetheless, the following tips are intended to give you some guidance.
1. Perform a financial inventory
The first thing you and your partner should do is do a full financial inventory together. For both you and your partner, an inventory should include information regarding your income, debt, retirement accounts, bank account balances, and property including homes, cars, and valuables. This will help if you create a spreadsheet that outlines each item and its value.
During discovery, you can ask for your partner’s financial information, or you can take this issue up with the court if he or she refuses to provide it to you. The family law courts have the right to compel spouses to surrender financial information.
2. Determine the date of separation
Divorce decisions are often based on the date of separation. Depending on the province, the separation date is usually the date on which a couple no longer lives together as a couple, or in some cases, the date on which at least one spouse declares their intention to separate, such as when one files for divorce.
Income and property are divided according to the date of separation. Income and property acquired during the marriage before the date of separation are typically considered joint property and split accordingly, while income and property acquired after the date of separation are typically considered separate property.
As a result, it is important to know how your province defines the date of separation. Additionally, it is advisable to have documented evidence that demonstrates your divorce date.
3. Organize your finances
Money from your joint accounts is not protected by closing them or withdrawing funds. According to the divorce proceedings, your financial assets and income will be reviewed. It’s best to leave it to your lawyer or the courts to decide how accounts should be split.
However, it is practical to separate your finances from your spouse’s in advance if you can. This allows you to begin the separation process. Furthermore, this protects you from your spouse’s poor financial decisions. It enables you to start investing on your own and work toward financial stability.
4. Check your credit reports
A divorce can result in a lot of financial turmoil. There may be a number of changes you need to make, including closing old accounts, opening new ones, and shifting debts between spouses. Making many of these changes can dramatically alter your finances and credit score.
Ensure that the information within your credit reports is accurate by reviewing them. You will be able to accurately determine your credit status before the divorce takes place. Make sure your credit report reflects changes you make, like paying off a credit card. It’s important to remember that changes do not happen right away, and that old accounts will remain on your report for up to seven years.
It is important to continue monitoring your credit after your divorce to make sure that there are no inconsistencies, mistakes, or unpaid bills that got lost in the divorce process.
5. Start establishing financial independence
Whether you were the wage-earner, completely dependent on your spouse, or somewhere in between, getting divorced means you need to start establishing financial independence, which involves several key steps:
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Create a budget
You will need to create a budget to ensure you are living within your means. You can use our simple spreadsheet to draft a budget that reflects your new financial reality.
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Open your own accounts
It is important to establish your own accounts before and after your divorce, including bank accounts, credit cards, utilities, and more. Despite your need to spend some time getting back on your feet, don’t ignore planning for the future. A retirement account and emergency fund are important, especially if you previously relied on the income of your spouse.
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Start building credit
Having a strong credit history is important for newly single people, particularly if they don’t have one. Establishing credit by getting a starter credit card is a great way to start building credit. Your ability to pay your bills on time is the single most important element of establishing credit.
At Hussain Law, we focus on helping our clients navigate the emotional and financial challenges of separation and divorce. Our office remains fully operational, and we have implemented various new procedures that allow us to continue to advise clients seamlessly during this time. If you have a family law issue that you need assistance with, please contact Ayesha Hussain at 647-428-3919.
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