Divorce rates in the USA hover between 38 and 40 percent. It is calculated that over the next 5 years, the divorce rate will continue to rise. Marital financial issues are among the top 5 reasons for divorce and marriage breakdowns.
If you find yourself in the divorce arena, take time to concentrate on yourself:
- Be positive, stay calm
- Focus on the future, let go of bitterness and dwelling on lost money
- Money does not make you a better person (father, brother, etc.)
- Money is worthless when you are dead—relationships matter
- Money does not bring happiness—but it pays bills and relieves financial stress
Start implementing good practice with your finances:
- Learn to keep records
- Know your bills and due dates
- Keep a record of balances owed
- Be aware of your Investments and their performances
- Read and understand bank statements
- Use a check register/notebook/tablet/smart phone to record every transaction
- Use a budgeting app such as Mint.com
- Gather documents in an organized manner
- Itemize bills and assets
- If cash is low, prioritize
- Contact your creditors to explain the situation and ask for feedback/advice
- Pay mortgage/rent/health/property insurance/utilities first
Check your level of life insurance—it may be too high if you have no dependent children, or too low if you are now the sole supporter of a child/children.
A disability policy may be useful if you are unable to work.
There are certain steps to take to become in control of your finances:
- Calculate your net worth = assets – liabilities (do this on regular basis to gauge your success)
- Decide on a budget and apply it (see earlier articles for budgeting implementation)
- Assess lifestyle changes (smaller house/apartment, different school, return to school, travel)
- Look at investments in the future for retirement
Colorado laws will help determine how your assets are divided in a divorce. Think carefully about giving up assets especially if you have custody of children, as your financial situation impacts them too.
It may be worth paying for a financial planner/tax expert to assess the real value of your assets, taking tax consequences into consideration prior to a divorce settlement. Your local credit union may be able to steer you in the right direction.
If you need to divide retirement plan assets, seek legal advice first, but be aware that attorneys may or may not protect you financially.
Look into a qualified domestic relations order (QDRO). This is a court order that can protect your interests.
Find out about IRS tax qualified plans covered by the Employee Retirement Income Security Act (ERISA).
Be aware that military/government pensions may be subject to different rules and regulations.
Most of all, use this period to make positive changes in your life, to grow and prosper. Remember, change is opportunity!